Is Enphase Energy (ENPH) Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Enphase Energy Inc (NASDAQ:ENPH) changed recently.

Is ENPH stock a buy or sell? Enphase Energy Inc (NASDAQ:ENPH) has experienced an increase in support from the world’s most elite money managers recently. Enphase Energy Inc (NASDAQ:ENPH) was in 48 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 42 hedge funds in our database with ENPH holdings at the end of September. Our calculations also showed that ENPH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Scott Bessent of Key Square Capital Management

Scott Bessent of Key Square Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing Enphase Energy Inc (NASDAQ:ENPH).

Do Hedge Funds Think ENPH Is A Good Stock To Buy Now?

At the end of December, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in ENPH 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.

More specifically, Sylebra Capital Management was the largest shareholder of Enphase Energy Inc (NASDAQ:ENPH), with a stake worth $346.2 million reported as of the end of December. Trailing Sylebra Capital Management was Park West Asset Management, which amassed a stake valued at $89.8 million. Two Sigma Advisors, Millennium Management, and Columbus Circle Investors 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 8.82% of its 13F portfolio. Noked Capital is also relatively very bullish on the stock, setting aside 7.27 percent of its 13F equity portfolio to ENPH.

Consequently, key hedge funds have been driving this bullishness. Encompass Capital Advisors, managed by Todd J. Kantor, established the most valuable position in Enphase Energy Inc (NASDAQ:ENPH). Encompass Capital Advisors had $34.3 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also initiated a $31.9 million position during the quarter. The other funds with brand new ENPH positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Philip Best’s Quaero Capital, and Scott Bessent’s Key Square Capital Management.

Let’s also examine 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 Equity Residential (NYSE:EQR), Arista Networks Inc (NYSE:ANET), Nokia Corporation (NYSE:NOK), W.W. Grainger, Inc. (NYSE:GWW), XP Inc. (NASDAQ:XP), Realty Income Corporation (NYSE:O), and Nasdaq, Inc. (NASDAQ:NDAQ). 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
EQR 28 557427 1
ANET 35 396873 8
NOK 19 186378 -2
GWW 30 507444 2
XP 29 472977 9
O 24 238964 0
NDAQ 27 340111 -5
Average 27.4 385739 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $988 million in ENPH’s case. Arista Networks Inc (NYSE:ANET) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our overall hedge fund sentiment score for ENPH is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately ENPH wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ENPH were disappointed as the stock returned -11.7% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.