Is Enphase Energy Inc (NASDAQ:ENPH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Enphase Energy Inc (NASDAQ:ENPH) a buy, sell, or hold? Money managers are becoming more confident. The number of bullish hedge fund positions advanced by 12 recently. Our calculations also showed that ENPH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ENPH was in 32 hedge funds' portfolios at the end of September. There were 20 hedge funds in our database with ENPH holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_728376" align="aligncenter" width="1613"] Jonathan Barrett of Luminus Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's analyze the fresh hedge fund action surrounding Enphase Energy Inc (NASDAQ:ENPH).
What have hedge funds been doing with Enphase Energy Inc (NASDAQ:ENPH)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 60% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ENPH over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Park West Asset Management held the most valuable stake in Enphase Energy Inc (NASDAQ:ENPH), which was worth $62.2 million at the end of the third quarter. On the second spot was Greenvale Capital which amassed $38.9 million worth of shares. Millennium Management, Luminus Management, and Electron Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 11.64% of its portfolio. Electron Capital Partners is also relatively very bullish on the stock, setting aside 4.02 percent of its 13F equity portfolio to ENPH.
Now, specific money managers have jumped into Enphase Energy Inc (NASDAQ:ENPH) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Enphase Energy Inc (NASDAQ:ENPH). Arrowstreet Capital had $16.2 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new ENPH investors: Donald Sussman's Paloma Partners, Richard Driehaus's Driehaus Capital, and Philip Hempleman's Ardsley Partners.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. These stocks are Rattler Midstream LP (NASDAQ:RTLR), Manchester United PLC (NYSE:MANU), Methanex Corporation (NASDAQ:MEOH), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks' market values are closest to ENPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RTLR,11,163347,-9 MANU,11,32460,1 MEOH,16,186485,-1 EBS,18,157940,5 Average,14,135058,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $290 million in ENPH's case. Emergent Biosolutions Inc (NYSE:EBS) is the most popular stock in this table. On the other hand Rattler Midstream LP (NASDAQ:RTLR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ENPH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ENPH were disappointed as the stock returned -1.6% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.