Was The Smart Money Right About Crowding Into Enphase Energy Inc (ENPH)?
How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Enphase Energy Inc (NASDAQ:ENPH).
Is Enphase Energy Inc (NASDAQ:ENPH) a healthy stock for your portfolio? The best stock pickers were taking a bullish view. The number of long hedge fund positions moved up by 5 lately. Enphase Energy Inc (NASDAQ:ENPH) was in 40 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ENPH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 35 hedge funds in our database with ENPH positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are plenty of signals market participants employ to evaluate their holdings. Some of the best signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the S&P 500 by a solid margin (see the details here).
Bruce Kovner of Caxton Associates LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let's take a look at the fresh hedge fund action surrounding Enphase Energy Inc (NASDAQ:ENPH).
What does smart money think about Enphase Energy Inc (NASDAQ:ENPH)?
Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ENPH over the last 20 quarters. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Sylebra Capital Management was the largest shareholder of Enphase Energy Inc (NASDAQ:ENPH), with a stake worth $156.2 million reported as of the end of June. Trailing Sylebra Capital Management was Renaissance Technologies, which amassed a stake valued at $115.9 million. Park West Asset Management, Electron Capital Partners, and Citadel Investment Group 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 Electron Capital Partners allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 8.15% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, earmarking 4.98 percent of its 13F equity portfolio to ENPH.
Consequently, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Enphase Energy Inc (NASDAQ:ENPH). Balyasny Asset Management had $22.7 million invested in the company at the end of the quarter. Zachary Miller's Parian Global Management also made a $12.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Bruce Kovner's Caxton Associates LP, Mark Coe's Intrinsic Edge Capital, and Noam Gottesman's GLG Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. We will take a look at Tandem Diabetes Care Inc (NASDAQ:TNDM), Allogene Therapeutics, Inc. (NASDAQ:ALLO), Globant SA (NYSE:GLOB), Huaneng Power International Inc (NYSE:HNP), AMERCO (NASDAQ:UHAL), B2Gold Corp (NYSE:BTG), and GFL Environmental Inc. (NYSE:GFL). This group of stocks' market caps are closest to ENPH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TNDM,32,401577,4 ALLO,24,329892,12 GLOB,17,235992,0 HNP,2,2391,-1 UHAL,20,327924,5 BTG,18,500334,-1 GFL,16,207198,6 Average,18.4,286473,3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $717 million in ENPH's case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our overall hedge fund sentiment score for ENPH is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on ENPH as the stock returned 106.2% since the end of June (through 10/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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