While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Entegra Financial Corp (NASDAQ:ENFC).
Is Entegra Financial Corp (NASDAQ:ENFC) going to take off soon? The best stock pickers are getting more bullish. The number of long hedge fund bets went up by 1 in recent months. Our calculations also showed that ENFC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a glance at the latest hedge fund action encompassing Entegra Financial Corp (NASDAQ:ENFC).
What have hedge funds been doing with Entegra Financial Corp (NASDAQ:ENFC)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ENFC over the last 17 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Tudor Investment Corp was the largest shareholder of Entegra Financial Corp (NASDAQ:ENFC), with a stake worth $10.5 million reported as of the end of September. Trailing Tudor Investment Corp was Renaissance Technologies, which amassed a stake valued at $4.8 million. Springbok Capital, Millennium Management, and Paloma Partners were 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 Tudor Investment Corp allocated the biggest weight to Entegra Financial Corp (NASDAQ:ENFC), around 0.36% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to ENFC.
There weren't any hedge funds initiating brand new positions in the stock during the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Entegra Financial Corp (NASDAQ:ENFC) but similarly valued. We will take a look at Sutro Biopharma, Inc. (NASDAQ:STRO), Kamada Ltd (NASDAQ:KMDA), Asanko Gold Inc (NYSE:AKG), and Chiasma Inc (NASDAQ:CHMA). This group of stocks' market valuations match ENFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STRO,10,38528,0 KMDA,3,4461,0 AKG,5,28345,-1 CHMA,11,52816,4 Average,7.25,31038,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $19 million in ENFC's case. Chiasma Inc (NASDAQ:CHMA) is the most popular stock in this table. On the other hand Kamada Ltd (NASDAQ:KMDA) is the least popular one with only 3 bullish hedge fund positions. Entegra Financial Corp (NASDAQ:ENFC) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ENFC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ENFC investors were disappointed as the stock returned 0% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.