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Were Hedge Funds Right About Dumping Just Energy Group, Inc. (JE)?

How do we determine whether Just Energy Group, Inc. (NYSE:JE) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Just Energy Group, Inc. (NYSE:JE) was in 9 hedge funds’ portfolios at the end of December. JE shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 12 hedge funds in our database with JE positions at the end of the previous quarter. Our calculations also showed that je isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

We’re going to take a look at the recent hedge fund action regarding Just Energy Group, Inc. (NYSE:JE).

What have hedge funds been doing with Just Energy Group, Inc. (NYSE:JE)?

At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in JE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with JE Positions

Among these funds, Arrowstreet Capital held the most valuable stake in Just Energy Group, Inc. (NYSE:JE), which was worth $6.4 million at the end of the fourth quarter. On the second spot was Ardsley Partners which amassed $5.9 million worth of shares. Moreover, Renaissance Technologies, GLG Partners, and Citadel Investment Group were also bullish on Just Energy Group, Inc. (NYSE:JE), allocating a large percentage of their portfolios to this stock.

Since Just Energy Group, Inc. (NYSE:JE) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers who sold off their full holdings heading into Q3. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $1.2 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund cut about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Just Energy Group, Inc. (NYSE:JE). We will take a look at Star Group, L.P. (NYSE:SGU), First Financial Corp (NASDAQ:THFF), SunCoke Energy Partners LP (NYSE:SXCP), and America’s Car-Mart, Inc. (NASDAQ:CRMT). This group of stocks’ market values are similar to JE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SGU 8 112418 -1
THFF 5 16653 -2
SXCP 5 1900 -1
CRMT 18 70778 2
Average 9 50437 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $21 million in JE’s case. America’s Car-Mart, Inc. (NASDAQ:CRMT) is the most popular stock in this table. On the other hand First Financial Corp (NASDAQ:THFF) is the least popular one with only 5 bullish hedge fund positions. Just Energy Group, Inc. (NYSE:JE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately JE wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); JE investors were disappointed as the stock returned 10% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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