With SolarCity Corp (NASDAQ:SCTY) having ended 2015 down by more than 60% and Sunedison Inc (NYSE:SUNE) declining by more than 90% (and also earning the title of the worst performing stock of the year), one would quickly reach the conclusion that investors hate solar stocks at the moment. Then again, most investors lose money in the market, so why not take a look at what hedge funds think about these stocks instead? In this article we’ll analyze their collective sentiment towards the solar industry, how they have positioned themselves in the market and which of the top solar firms they like the most.
At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our investing strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas (see more details here).
Although it looks like Sunedison Inc (NYSE:SUNE) is out of favor with investors, as the number of investors in our database long the stock fell to 50 from 73 during the fourth quarter, there are some hedge fund managers that see great value in the company. Having recently gone activist on the stock, David Einhorn believes that the company’s real value lies at approximately $32 per share, which would represent an 18-fold increase from the mere $1.77 that shares are currently trading at. Mr. Einhorn appears to want to unlock that value by stripping the company of its assets, based on his recent efforts. Mr. Einhorn’s fund Greenlight Capital has managed to get an additional seat on the company’s board of directors to which it appointed Claire Gogel, a former partner at the fund. Furthermore, the fund has managed to push through a change of Sunedison Inc (NYSE:SUNE)’s bylaws that would prevent the company from issuing equity without a “supermajority vote” of the board in the next two years. At the end of 2015, Greenlight Capital held 18.6 million shares of SunEdison valued at $94.7 million. David Gallo is also betting on the stock, as his fund Valinor Management, reported a 43% increase in its holding of the stock during the fourth quarter, to 22.2 million shares worth $113 million.
First Solar, Inc. (NASDAQ:FSLR) has recently become a superstar in the solar industry. As opposed to the majority of its peers that ended 2015 with major declines, First Solar, Inc. (NASDAQ:FSLR) managed to not only stay in the green but well in the green, having ended the year up by 48%. The company has reaped the benefits from an extension of the ITC tax credit, which offers up to 30% tax rebates on solar systems acquisitions, and the import tariffs on Chinese solar products levied by the United States back in 2014. Hedge fund managers were quick to pounce, with 30 funds holding 7.1% of the company’s shares on December 31. Cliff Asness is a big fan of First Solar, Inc. (NASDAQ:FSLR), having increased his stake by 105% during the fourth quarter. In its latest 13F filing, Asness’ AQR Capital Management reported ownership of 2.08 million shares of the company valued at $137 million. John Overdeck and David Siegel, the managers of Two Sigma Advisors, are also bullish on the stock, having boosted their stake by 15% during the quarter, to 958,620 shares worth roughly $63.2 million.
Although it is a key player in the solar industry, SolarCity Corp (NASDAQ:SCTY) could not escape the bearish curse of Jim Chanos. The notorious short seller aired his gloomy views back in August 2015 and reiterated his short position in December, wishing he could “borrow more shares to sell” short. The stock has indeed crumbled, falling by more than 80% from it’s all-time high and by 60% from its price on the day Chanos announced his short. Naturally, you’d wonder what other smart money managers make of all this. Hedge fund sentiment towards SolarCity Corp (NASDAQ:SCTY) did not change over the fourth quarter, as the number of long positions stayed the same at 29, or roughly 4% of the funds followed by Insider Monkey. Karthik Sarma, the manager of SRS Investment Management, is still bullish on the stock, having increased his bet by 7% to 8.5 million shares. Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors, on the other hand, reported a 71% reduction of its stake during the fourth quarter, to just 1.31 million shares.
Turn the page to find out more about two solar stocks that gained in popularity among hedge funds during the fourth quarter.