Were Hedge Funds Right About Flocking Into Sunrun Inc (RUN) ?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Sunrun Inc (NASDAQ:RUN).

Sunrun Inc (NASDAQ:RUN) has seen an increase in support from the world’s most elite money managers lately. RUN was in 17 hedge funds’ portfolios at the end of June. There were 15 hedge funds in our database with RUN positions at the end of the previous quarter. Our calculations also showed that RUN isn’t among the 30 most popular stocks among hedge funds (view video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action surrounding Sunrun Inc (NASDAQ:RUN).

What does smart money think about Sunrun Inc (NASDAQ:RUN)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in RUN over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Philip Hempleman Ardsley Partners

The largest stake in Sunrun Inc (NASDAQ:RUN) was held by Tiger Global Management LLC, which reported holding $410.3 million worth of stock at the end of March. It was followed by Ardsley Partners with a $26.2 million position. Other investors bullish on the company included Point72 Asset Management, Arosa Capital Management, and Driehaus Capital.

As one would reasonably expect, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the most outsized position in Sunrun Inc (NASDAQ:RUN). Point72 Asset Management had $13.5 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $6.7 million position during the quarter. The other funds with new positions in the stock are Brian Olson, Baehyun Sung, and Jamie Waters’s Blackstart Capital, Peter Muller’s PDT Partners, and John Brennan’s Sirios Capital Management.

Let’s now review hedge fund activity in other stocks similar to Sunrun Inc (NASDAQ:RUN). These stocks are National Vision Holdings, Inc. (NASDAQ:EYE), Core Laboratories N.V. (NYSE:CLB), Patterson-UTI Energy, Inc. (NASDAQ:PTEN), and II-VI, Inc. (NASDAQ:IIVI). This group of stocks’ market caps resemble RUN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EYE 21 415880 5
CLB 21 244121 6
PTEN 25 289200 -9
IIVI 21 110008 -1
Average 22 264802 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $498 million in RUN’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand National Vision Holdings, Inc. (NASDAQ:EYE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Sunrun Inc (NASDAQ:RUN) is even less popular than EYE. Hedge funds dodged a bullet by taking a bearish stance towards RUN. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RUN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RUN investors were disappointed as the stock returned -11% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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