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In this article we will check out the progression of hedge fund sentiment towards Edison International (NYSE:EIX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is EIX stock a buy? The smart money was taking an optimistic view. The number of long hedge fund positions moved up by 2 lately. Edison International (NYSE:EIX) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 37. Our calculations also showed that EIX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 28 hedge funds in our database with EIX positions at the end of the third quarter.
At the moment there are tons of gauges stock market investors use to evaluate their stock investments. A duo of the less utilized gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outclass the market by a significant amount (see the details here).
Richard S. Pzena of Pzena Investment Management
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Do Hedge Funds Think EIX Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards EIX over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Edison International (NYSE:EIX) was held by Pzena Investment Management, which reported holding $505 million worth of stock at the end of December. It was followed by Zimmer Partners with a $468 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to Edison International (NYSE:EIX), around 10.62% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 6.87 percent of its 13F equity portfolio to EIX.
Now, some big names were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, created the largest position in Edison International (NYSE:EIX). ExodusPoint Capital had $12.5 million invested in the company at the end of the quarter. Mark T. Gallogly's Centerbridge Partners also made a $9 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Aaron Wertentheil's Jones Road Capital Management, and Parvinder Thiara's Athanor Capital.
Let's check out hedge fund activity in other stocks similar to Edison International (NYSE:EIX). These stocks are Maxim Integrated Products Inc. (NASDAQ:MXIM), Rogers Communications Inc. (NYSE:RCI), Tyson Foods, Inc. (NYSE:TSN), DTE Energy Company (NYSE:DTE), Equifax Inc. (NYSE:EFX), Cloudflare, Inc. (NYSE:NET), and PT Telekomunikasi Indonesia (NYSE:TLK). This group of stocks' market valuations are similar to EIX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MXIM,54,2844204,2 RCI,15,279915,0 TSN,38,867498,2 DTE,29,309932,1 EFX,36,2262542,-6 NET,60,1182477,16 TLK,4,173765,-4 Average,33.7,1131476,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $1131 million. That figure was $1442 million in EIX's case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. Edison International (NYSE:EIX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EIX is 54.5. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately EIX wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); EIX investors were disappointed as the stock returned -3.7% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.