Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Enphase Energy Inc (NASDAQ:ENPH) to find out whether there were any major changes in hedge funds’ views.
Is ENPH a good stock to buy now? Prominent investors were becoming more confident. The number of long hedge fund positions advanced by 2 in recent months. Enphase Energy Inc (NASDAQ:ENPH) was in 42 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ENPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 40 hedge funds in our database with ENPH positions at the end of the second quarter.
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding Enphase Energy Inc (NASDAQ:ENPH).
Do Hedge Funds Think ENPH Is A Good Stock To Buy Now?
At third quarter’s end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ENPH over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Sylebra Capital Management held the most valuable stake in Enphase Energy Inc (NASDAQ:ENPH), which was worth $345.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $168 million worth of shares. Electron Capital Partners, Park West Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 10.63% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 6.79 percent of its 13F equity portfolio to ENPH.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the largest position in Enphase Energy Inc (NASDAQ:ENPH). Holocene Advisors had $6.1 million invested in the company at the end of the quarter. Michael Cowley’s Sandbar Asset Management also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Roy Vermus and Shlomi Bracha’s Noked Capital, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Farnum Brown and Adam Seitchik’s Arjuna Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. We will take a look at Beyond Meat, Inc. (NASDAQ:BYND), Crown Holdings, Inc. (NYSE:CCK), Packaging Corporation Of America (NYSE:PKG), Apollo Global Management Inc (NYSE:APO), Graco Inc. (NYSE:GGG), IAC/InterActiveCorp (NASDAQ:IAC), and United Airlines Holdings Inc (NASDAQ:UAL). This group of stocks’ market valuations match ENPH’s market valuation.
|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 37.7 hedge funds with bullish positions and the average amount invested in these stocks was $925 million. That figure was $1045 million in ENPH’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 23 bullish hedge fund positions. Enphase Energy Inc (NASDAQ:ENPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ENPH is 56.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ENPH as the stock returned 63.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.