It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU).
Is Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU) a buy here? Hedge funds are selling. The number of bullish hedge fund positions fell by 3 lately. Our calculations also showed that UUUU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). UUUU was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with UUUU holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to check out the new hedge fund action regarding Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU).
Hedge fund activity in Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU)
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in UUUU a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU) was held by Prescott Group Capital Management, which reported holding $1 million worth of stock at the end of September. It was followed by CQS Cayman LP with a $0.9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU), around 0.32% of its 13F portfolio. Signition LP is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to UUUU.
Seeing as Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of money managers who sold off their entire stakes heading into Q4. It’s worth mentioning that Michael A. Price and Amos Meron’s Empyrean Capital Partners said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $4.1 million in stock. John Burbank’s fund, Passport Capital, also sold off its stock, about $3.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU). We will take a look at Unit Corporation (NYSE:UNT), Community Financial Corp (NASDAQ:TCFC), ESSA Bancorp, Inc. (NASDAQ:ESSA), and Capital Bancorp, Inc. (NASDAQ:CBNK). All of these stocks’ market caps resemble UUUU’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $2 million in UUUU’s case. Unit Corporation (NYSE:UNT) is the most popular stock in this table. On the other hand Community Financial Corp (NASDAQ:TCFC) is the least popular one with only 2 bullish hedge fund positions. Energy Fuels Inc Ordinary Shares (Canada) (NYSE:UUUU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately UUUU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UUUU were disappointed as the stock returned 2.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.