Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. An average long/short hedge fund returned only 5% due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' stock picks rather than directly investing in hedge funds. 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 Enel Chile S.A. (NYSE:ENIC).
Enel Chile S.A. (NYSE:ENIC) was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. ENIC has experienced an increase in hedge fund interest in recent months. There were 4 hedge funds in our database with ENIC holdings at the end of the previous quarter. Our calculations also showed that ENIC isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a gander at the fresh hedge fund action regarding Enel Chile S.A. (NYSE:ENIC).
How are hedge funds trading Enel Chile S.A. (NYSE:ENIC)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 75% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ENIC over the last 14 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.
The largest stake in Enel Chile S.A. (NYSE:ENIC) was held by AQR Capital Management, which reported holding $9.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $6.1 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Millennium Management.
As aggregate interest increased, key money managers have jumped into Enel Chile S.A. (NYSE:ENIC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Enel Chile S.A. (NYSE:ENIC). Arrowstreet Capital had $4.7 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 only other fund with a new position in the stock is Matthew Tewksbury's Stevens Capital Management.
Let's check out hedge fund activity in other stocks similar to Enel Chile S.A. (NYSE:ENIC). We will take a look at Vereit Inc (NYSE:VER), Gaming and Leisure Properties Inc (NASDAQ:GLPI), Nordson Corporation (NASDAQ:NDSN), and Steel Dynamics, Inc. (NASDAQ:STLD). This group of stocks' market caps match ENIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VER,18,361397,-4 GLPI,27,955443,-6 NDSN,19,76198,3 STLD,30,542904,2 Average,23.5,483986,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $27 million in ENIC's case. Steel Dynamics, Inc. (NASDAQ:STLD) is the most popular stock in this table. On the other hand Vereit Inc (NYSE:VER) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Enel Chile S.A. (NYSE:ENIC) is even less popular than VER. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately ENIC wasn't in this group. Hedge funds that bet on ENIC were disappointed as the stock returned 5.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.