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Should You Buy EnCana Corporation (ECA)?

The elite 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 EnCana Corporation (NYSE:ECA) from the perspective of those elite funds.

EnCana Corporation (NYSE:ECA) has seen an increase in hedge fund sentiment of late. ECA was in 32 hedge funds’ portfolios at the end of the third quarter of 2018. There were 31 hedge funds in our database with ECA holdings at the end of the previous quarter. Our calculations also showed that ECA isn’t among the 30 most popular stocks among hedge funds.

According to most market participants, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are greater than 8,000 funds trading today, Our researchers choose to focus on the aristocrats of this club, around 700 funds. It is estimated that this group of investors shepherd bulk of the smart money’s total asset base, and by tracking their highest performing picks, Insider Monkey has deciphered various investment strategies that have historically outpaced the market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Andreas Halvorsen

We’re going to go over the recent hedge fund action encompassing EnCana Corporation (NYSE:ECA).

What have hedge funds been doing with EnCana Corporation (NYSE:ECA)?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ECA over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

ECA_dec2018

Among these funds, Viking Global held the most valuable stake in EnCana Corporation (NYSE:ECA), which was worth $972.4 million at the end of the third quarter. On the second spot was Steadfast Capital Management which amassed $239.1 million worth of shares. Moreover, Point State Capital, Point72 Asset Management, and Brenham Capital Management were also bullish on EnCana Corporation (NYSE:ECA), allocating a large percentage of their portfolios to this stock.

Now, some big names have jumped into EnCana Corporation (NYSE:ECA) headfirst. Brenham Capital Management, managed by John Labanowski, initiated the most outsized position in EnCana Corporation (NYSE:ECA). Brenham Capital Management had $83.6 million invested in the company at the end of the quarter. Rob Citrone’s Discovery Capital Management also initiated a $65.1 million position during the quarter. The other funds with brand new ECA positions are Jonathan Barrett and Paul Segal’s Luminus Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Louis Bacon’s Moore Global Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as EnCana Corporation (NYSE:ECA) but similarly valued. These stocks are PTC Inc (NASDAQ:PTC), Cincinnati Financial Corporation (NASDAQ:CINF), Advance Auto Parts, Inc. (NYSE:AAP), and Kohl’s Corporation (NYSE:KSS). This group of stocks’ market valuations are similar to ECA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTC 46 1630384 6
CINF 11 527191 -4
AAP 38 1776005 9
KSS 29 954349 3
Average 31 1221982 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.22 billion. That figure was $2.06 billion in ECA’s case. PTC Inc (NASDAQ:PTC) is the most popular stock in this table. On the other hand Cincinnati Financial Corporation (NASDAQ:CINF) is the least popular one with only 11 bullish hedge fund positions. EnCana Corporation (NYSE:ECA) 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. In this regard PTC might be a better candidate to consider a long position.

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

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