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How do we determine whether Enstar Group Ltd. (NASDAQ:ESGR) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Enstar Group Ltd. (NASDAQ:ESGR) investors should pay attention to an increase in hedge fund sentiment in recent months. Our calculations also showed that ESGR 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.
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Lei Zhang of Hillhouse Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action encompassing Enstar Group Ltd. (NASDAQ:ESGR).
How have hedgies been trading Enstar Group Ltd. (NASDAQ:ESGR)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in ESGR 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the largest position in Enstar Group Ltd. (NASDAQ:ESGR). Hillhouse Capital Management has a $332 million position in the stock, comprising 4.6% of its 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, led by Ric Dillon, holding a $50.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Renaissance Technologies, Israel Englander's Millennium Management and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Hillhouse Capital Management allocated the biggest weight to Enstar Group Ltd. (NASDAQ:ESGR), around 4.56% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 1.21 percent of its 13F equity portfolio to ESGR.
As aggregate interest increased, specific money managers were leading the bulls' herd. Winton Capital Management, managed by David Harding, assembled the largest position in Enstar Group Ltd. (NASDAQ:ESGR). Winton Capital Management had $3.6 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $2.4 million position during the quarter. The only other fund with a brand new ESGR position is Charles Davidson and Joseph Jacobs's Wexford Capital.
Let's check out hedge fund activity in other stocks similar to Enstar Group Ltd. (NASDAQ:ESGR). These stocks are Gold Fields Limited (NYSE:GFI), Azul S.A. (NYSE:AZUL), New Jersey Resources Corp (NYSE:NJR), and Insperity Inc (NYSE:NSP). This group of stocks' market valuations are closest to ESGR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GFI,17,282757,3 AZUL,12,134406,-1 NJR,14,82886,2 NSP,24,342641,0 Average,16.75,210673,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $415 million in ESGR's case. Insperity Inc (NYSE:NSP) is the most popular stock in this table. On the other hand Azul S.A. (NYSE:AZUL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Enstar Group Ltd. (NASDAQ:ESGR) is even less popular than AZUL. 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. A small number of hedge funds were also right about betting on ESGR, though not to the same extent, as the stock returned 7.5% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.