At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Enzo Biochem, Inc. (NYSE:ENZ).
Is Enzo Biochem, Inc. (NYSE:ENZ) the right pick for your portfolio? Money managers are becoming less hopeful. The number of bullish hedge fund bets decreased by 2 recently. Our calculations also showed that ENZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ENZ was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with ENZ positions at the end of the previous 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 58 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, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the key hedge fund action encompassing Enzo Biochem, Inc. (NYSE:ENZ).
How are hedge funds trading Enzo Biochem, Inc. (NYSE:ENZ)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ENZ over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Harbert Management, managed by Raymond J. Harbert, holds the most valuable position in Enzo Biochem, Inc. (NYSE:ENZ). Harbert Management has a $14.2 million position in the stock, comprising 23.8% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $8.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions consist of John W. Rogers’s Ariel Investments, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Harbert Management allocated the biggest weight to Enzo Biochem, Inc. (NYSE:ENZ), around 23.77% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to ENZ.
Since Enzo Biochem, Inc. (NYSE:ENZ) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that slashed their positions entirely in the first quarter. It’s worth mentioning that Bradley Louis Radoff’s Fondren Management cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $1.9 million in stock, and Andre F. Perold’s HighVista Strategies was right behind this move, as the fund dumped about $0.1 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks similar to Enzo Biochem, Inc. (NYSE:ENZ). These stocks are Evans Bancorp Inc. (NYSE:EVBN), Mayville Engineering Company, Inc. (NYSE:MEC), The Eastern Company (NASDAQ:EML), and Conn’s, Inc. (NASDAQ:CONN). All of these stocks’ market caps match ENZ’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 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $26 million in ENZ’s case. Conn’s, Inc. (NASDAQ:CONN) is the most popular stock in this table. On the other hand Evans Bancorp Inc. (NYSE:EVBN) is the least popular one with only 2 bullish hedge fund positions. Enzo Biochem, Inc. (NYSE:ENZ) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately ENZ wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ENZ were disappointed as the stock returned -8.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.