In this article you are going to find out whether hedge funds think Brookfield Renewable Partners L.P. (NYSE:BEP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Brookfield Renewable Partners L.P. (NYSE:BEP) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that BEP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 S&P 500 ETFs by more than 44 percentage points since March 2017 (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_364873" align="aligncenter" width="397"] Bernard Lambilliotte of Ecofin Ltd[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's check out the fresh hedge fund action surrounding Brookfield Renewable Partners L.P. (NYSE:BEP).
How are hedge funds trading Brookfield Renewable Partners L.P. (NYSE:BEP)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in BEP a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Brookfield Renewable Partners L.P. (NYSE:BEP), with a stake worth $12.3 million reported as of the end of September. Trailing Renaissance Technologies was Ecofin Ltd, which amassed a stake valued at $5.7 million. Waratah Capital Advisors was 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 Ecofin Ltd allocated the biggest weight to Brookfield Renewable Partners L.P. (NYSE:BEP), around 3.9% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to BEP.
Since Brookfield Renewable Partners L.P. (NYSE:BEP) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Robert Joseph Caruso's Select Equity Group dropped the largest stake of the 750 funds followed by Insider Monkey, worth close to $3.3 million in stock. Ken Griffin's fund, Citadel Investment Group, also cut its stock, about $3.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Brookfield Renewable Partners L.P. (NYSE:BEP). These stocks are E*TRADE Financial Corporation (NASDAQ:ETFC), Dropbox, Inc. (NASDAQ:DBX), CNH Industrial NV (NYSE:CNHI), and The Carlyle Group Inc. (NASDAQ:CG). This group of stocks' market valuations resemble BEP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETFC,37,941990,-11 DBX,44,985316,-2 CNHI,17,156917,1 CG,16,232286,3 Average,28.5,579127,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $19 million in BEP's case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand The Carlyle Group Inc. (NASDAQ:CG) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Brookfield Renewable Partners L.P. (NYSE:BEP) is even less popular than CG. Hedge funds dodged a bullet by taking a bearish stance towards BEP. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately BEP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BEP investors were disappointed as the stock returned 14.1% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.