We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like El Paso Electric Company (NYSE:EE).
El Paso Electric Company (NYSE:EE) shareholders have witnessed a decrease in hedge fund sentiment of late. EE was in 16 hedge funds' portfolios at the end of June. There were 22 hedge funds in our database with EE holdings at the end of the previous quarter. Our calculations also showed that EE isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are viewed as slow, outdated financial tools of years past. While there are more than 8000 funds with their doors open at present, Our experts look at the masters of this club, about 750 funds. These hedge fund managers have their hands on most of the hedge fund industry's total capital, and by shadowing their unrivaled stock picks, Insider Monkey has formulated a few investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the recent hedge fund action regarding El Paso Electric Company (NYSE:EE).
How are hedge funds trading El Paso Electric Company (NYSE:EE)?
Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EE over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the most valuable position in El Paso Electric Company (NYSE:EE). Renaissance Technologies has a $100.3 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds a $91.9 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Israel Englander's Millennium Management, Robert Emil Zoellner's Alpine Associates and John Orrico's Water Island Capital.
Since El Paso Electric Company (NYSE:EE) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds who sold off their positions entirely by the end of the second quarter. It's worth mentioning that Jonathan Barrett and Paul Segal's Luminus Management dumped the biggest stake of the 750 funds watched by Insider Monkey, totaling close to $3.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $2.8 million worth. These moves are interesting, as total hedge fund interest was cut by 6 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks similar to El Paso Electric Company (NYSE:EE). We will take a look at Workiva Inc (NYSE:WK), Genesis Energy, L.P. (NYSE:GEL), ABM Industries Incorporated (NYSE:ABM), and Sunoco LP (NYSE:SUN). This group of stocks' market valuations are closest to EE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WK,20,245012,3 GEL,4,29878,1 ABM,10,38801,2 SUN,6,15222,-1 Average,10,82228,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $380 million in EE's case. Workiva Inc (NYSE:WK) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 4 bullish hedge fund positions. El Paso Electric Company (NYSE:EE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on EE, though not to the same extent, as the stock returned 3.2% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.