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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Enzo Biochem, Inc. (NYSE:ENZ) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is ENZ a good stock to buy now? The smart money was taking an optimistic view. The number of long hedge fund positions moved up by 2 in recent months. Enzo Biochem, Inc. (NYSE:ENZ) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that ENZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we're going to take a peek at the recent hedge fund action encompassing Enzo Biochem, Inc. (NYSE:ENZ).
Do Hedge Funds Think ENZ Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in ENZ a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Harbert Management held the most valuable stake in Enzo Biochem, Inc. (NYSE:ENZ), which was worth $11.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7.6 million worth of shares. Roumell Asset Management, Ariel Investments, and Prelude Capital (previously Springbok Capital) 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 Harbert Management allocated the biggest weight to Enzo Biochem, Inc. (NYSE:ENZ), around 14.49% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, earmarking 9.85 percent of its 13F equity portfolio to ENZ.
As one would reasonably expect, key money managers were leading the bulls' herd. Prelude Capital (previously Springbok Capital), managed by Gavin Saitowitz and Cisco J. del Valle, assembled the largest position in Enzo Biochem, Inc. (NYSE:ENZ). Prelude Capital (previously Springbok Capital) had $0.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.1 million position during the quarter. The following funds were also among the new ENZ investors: Cliff Asness's AQR Capital Management and Jay Petschek and Steven Major's Corsair Capital Management.
Let's go over hedge fund activity in other stocks similar to Enzo Biochem, Inc. (NYSE:ENZ). We will take a look at Centrus Energy Corp. (NYSE:LEU), Velocity Financial, Inc. (NYSE:VEL), Wayside Technology Group, Inc. (NASDAQ:WSTG), Partners Bancorp (NASDAQ:PTRS), Gritstone Oncology, Inc. (NASDAQ:GRTS), Arlington Asset Investment Corp (NYSE:AI), and Cogent Biosciences (NASDAQ:UMRX). This group of stocks' market caps resemble ENZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEU,3,3398,1 VEL,7,19829,-1 WSTG,3,7345,0 PTRS,1,88,0 GRTS,7,15279,-5 AI,5,2209,0 UMRX,10,49323,8 Average,5.1,13924,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $27 million in ENZ's case. Cogent Biosciences (NASDAQ:UMRX) is the most popular stock in this table. On the other hand Partners Bancorp (NASDAQ:PTRS) is the least popular one with only 1 bullish hedge fund positions. Enzo Biochem, Inc. (NYSE:ENZ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ENZ is 82. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ENZ as the stock returned 14.2% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.