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Is Enphase Energy (ENPH) A Smart Long-Term Buy?

·3 min read

ClearBridge Investments, an investment management firm, published its “SMID Cap Growth Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. During the second quarter, the ClearBridge SMID Cap Growth Strategy outperformed the benchmark Russell 2500 Growth Index. On an absolute basis, the Strategy had gains across nine of the 10 sectors in which it was invested during the quarter (out of 11 sectors total), with the IT, health care, and industrials sectors the leading contributors. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Enphase Energy, Inc. (NASDAQ: ENPH) and discussed its stance on the firm. Enphase Energy, Inc. is a Fremont, California-based solar energy company with a $20.9 billion market capitalization. ENPH delivered a -11.46% return since the beginning of the year, while its 12-month returns are up by 71.80%. The stock closed at $155.36 per share on October 01, 2021.

Here is what ClearBridge Investments has to say about Enphase Energy, Inc. in its Q2 2021 investor letter:

"Also in the solar space, we initiated a position in Enphase Energy (classified in the IT sector), which designs and manufactures microinverters for residential and small commercial solar photovoltaic (PV) systems. Enphase was the first company to commercialize microinverters for residential and small commercial solar PV systems. A microinverter, a type of MLPE, is a small inverter placed directly on the back of each solar module, as opposed to the traditional system of one string inverter on the side of the building."

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Copyright: lassedesignen / 123RF Stock Photo

Based on our calculations, Enphase Energy, Inc. (NASDAQ: ENPH) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ENPH was in 44 hedge fund portfolios at the end of the first half of 2021, compared to 49 funds in the previous quarter. Enphase Energy, Inc. (NASDAQ: ENPH) delivered a -16.66% return in the past 3 months.

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 S&P 500 ETFs by 115 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.

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 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage.

Disclosure: None. This article is originally published at Insider Monkey.