It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Sunrun Inc (NASDAQ:RUN).
Is Sunrun Inc (NASDAQ:RUN) the right investment to pursue these days? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets went up by 14 in recent months. RUN was in 14 hedge funds’ portfolios at the end of September. There were 0 hedge funds in our database with RUN positions at the end of the previous quarter because the company did its initial public offering in August. 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 boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Schweitzer-Mauduit International, Inc. (NYSE:SWM), AAON, Inc. (NASDAQ:AAON), and Navistar International Corp (NYSE:NAV) to gather more data points.
With all of this in mind, let’s review the recent action surrounding Sunrun Inc (NASDAQ:RUN).
What have hedge funds been doing with Sunrun Inc (NASDAQ:RUN)?
According to Insider Monkey’s hedge fund database, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the biggest position in Sunrun Inc (NASDAQ:RUN). Canyon Capital Advisors has a $80.3 million position in the stock, comprising 2.2% of its 13F portfolio. Coming in second is Zimmer Partners, led by Stuart J. Zimmer, holding a $21.3 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain Ken Griffin’s Citadel Investment Group, Seth Klarman’s Baupost Group and Christopher Lyle’s SCGE Management.
Let’s also examine hedge fund activity in other stocks similar to Sunrun Inc (NASDAQ:RUN). These stocks are Schweitzer-Mauduit International, Inc. (NYSE:SWM), AAON, Inc. (NASDAQ:AAON), Navistar International Corp (NYSE:NAV), and Sonic Automotive Inc (NYSE:SAH). This group of stocks’ market valuations are closest to RUN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $159 million in RUN’s case. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 8 bullish hedge fund positions. Sunrun Inc (NASDAQ:RUN) 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. In this regard NAV might be a better candidate to consider a long position.