Is TerraForm Power Inc (TERP) Going to Burn These Hedge Funds?

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The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at TerraForm Power Inc (NASDAQ:TERP) from the perspective of those successful funds.

TerraForm Power Inc (NASDAQ:TERP) has seen a decrease in activity from the world’s largest hedge funds of late. There were 26 hedge funds in our database with TERP holdings at the end of June and this number dipped to 20 on September 30th. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a decline in popularity but it may still be more popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Badger Meter, Inc. (NYSE:BMI), New Relic Inc (NYSE:NEWR), and Matthews International Corp (NASDAQ:MATW) to gather more data points.

Follow Terraform Power Inc. (NASDAQ:TERP)

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a look at the latest action regarding TerraForm Power Inc (NASDAQ:TERP).

What have hedge funds been doing with TerraForm Power Inc (NASDAQ:TERP)?

Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TERP over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HedgeFundSentimentChart (67)

Of the funds tracked by Insider Monkey, David Tepper’s Appaloosa Management LP has the number one position in TerraForm Power Inc (NASDAQ:TERP), worth close to $121.1 million, amounting to 2.8% of its total 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $69 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Buckley Ratchford’s Wingspan Investment Management and John Thiessen’s Vertex One Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks. Wingspan Investment Management announced that it will be closing. This means it will sell its entire position in TERP over the next few weeks.

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