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Hedge Funds Are Dumping Enel Chile S.A. (ENIC)

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In this article we will take a look at whether hedge funds think Enel Chile S.A. (NYSE:ENIC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Enel Chile S.A. (NYSE:ENIC) investors should be aware of a decrease in enthusiasm from smart money in recent months. Enel Chile S.A. (NYSE:ENIC) was in 4 hedge funds' portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that ENIC 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

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 10 most profitable companies in the world 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 glance at the new hedge fund action surrounding Enel Chile S.A. (NYSE:ENIC).

Hedge fund activity in Enel Chile S.A. (NYSE:ENIC)

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in ENIC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in Enel Chile S.A. (NYSE:ENIC). Renaissance Technologies has a $9.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $4.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Israel Englander's Millennium Management, Donald Sussman's Paloma Partners and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Enel Chile S.A. (NYSE:ENIC), around 0.01% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to ENIC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ENIC as a viable investment and initiated a position in the stock.

Let's go over hedge fund activity in other stocks similar to Enel Chile S.A. (NYSE:ENIC). These stocks are Diamondback Energy Inc (NASDAQ:FANG), KT Corporation (NYSE:KT), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Wyndham Hotels & Resorts, Inc. (NYSE:WH), FLIR Systems, Inc. (NASDAQ:FLIR), National Instruments Corporation (NASDAQ:NATI), and LG Display Co Ltd. (NYSE:LPL). This group of stocks' market caps are closest to ENIC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FANG,23,133783,-6 KT,10,147562,-2 NCLH,26,241506,-2 WH,33,621586,-3 FLIR,25,243308,-13 NATI,22,210864,-13 LPL,7,32638,2 Average,20.9,233035,-5.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was $15 million in ENIC's case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Enel Chile S.A. (NYSE:ENIC) is even less popular than LPL. Our overall hedge fund sentiment score for ENIC is 19. 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. Hedge funds dodged a bullet by taking a bearish stance towards ENIC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately ENIC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ENIC investors were disappointed as the stock returned 4.7% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.

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

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