Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Enbridge Inc (NYSE:ENB).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a gander at the fresh hedge fund action encompassing Enbridge Inc (NYSE:ENB).
What does the smart money think about Enbridge Inc (NYSE:ENB)?
At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in ENB over the last 15 quarters. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Enbridge Inc (NYSE:ENB), which was worth $38.3 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $35.3 million worth of shares. Moreover, Zimmer Partners, Two Sigma Advisors, and Citadel Investment Group were also bullish on Enbridge Inc (NYSE:ENB), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names have jumped into Enbridge Inc (NYSE:ENB) headfirst. Vertex One Asset Management, managed by John Thiessen, established the largest position in Enbridge Inc (NYSE:ENB). Vertex One Asset Management had $10.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $3 million investment in the stock during the quarter. The other funds with new positions in the stock are David Costen Haley's HBK Investments, Richard Driehaus's Driehaus Capital, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Enbridge Inc (NYSE:ENB) but similarly valued. These stocks are Banco Bradesco SA (NYSE:BBD), Equinor ASA (NYSE:EQNR), Morgan Stanley (NYSE:MS), and Mondelez International Inc (NASDAQ:MDLZ). This group of stocks' market values are closest to ENB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBD,18,753361,2 EQNR,10,352240,-3 MS,54,4060103,-3 MDLZ,47,2160286,2 Average,32.25,1831498,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1831 million. That figure was $174 million in ENB's case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 10 bullish hedge fund positions. Enbridge Inc (NYSE:ENB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on ENB as the stock returned 3.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.