"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Enel Americas S.A. (NYSE:ENIA) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare ENIA to other stocks including Dover Corporation (NYSE:DOV), Conagra Brands, Inc. (NYSE:CAG), and Raymond James Financial, Inc. (NYSE:RJF) to get a better sense of its popularity.
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' 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let's take a glance at the fresh hedge fund action encompassing Enel Americas S.A. (NYSE:ENIA).
What does the smart money think about Enel Americas S.A. (NYSE:ENIA)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. By comparison, 8 hedge funds held shares or bullish call options in ENIA a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Enel Americas S.A. (NYSE:ENIA) was held by Arrowstreet Capital, which reported holding $23.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $21.7 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Prince Street Capital Management.
Seeing as Enel Americas S.A. (NYSE:ENIA) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few funds who were dropping their full holdings last quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management sold off the largest investment of all the hedgies watched by Insider Monkey, totaling about $6.1 million in stock, and Zilvinas Mecelis's Covalis Capital was right behind this move, as the fund dumped about $5.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Enel Americas S.A. (NYSE:ENIA). We will take a look at Dover Corporation (NYSE:DOV), Conagra Brands, Inc. (NYSE:CAG), Raymond James Financial, Inc. (NYSE:RJF), and Varian Medical Systems, Inc. (NYSE:VAR). This group of stocks' market values are similar to ENIA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOV,29,529420,6 CAG,33,678362,-5 RJF,25,727652,-6 VAR,30,803824,11 Average,29.25,684815,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $80 million in ENIA's case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Raymond James Financial, Inc. (NYSE:RJF) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Enel Americas S.A. (NYSE:ENIA) is even less popular than RJF. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ENIA wasn't in this group. Hedge funds that bet on ENIA were disappointed as the stock returned 4.4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.