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 Enviva Partners, LP (NYSE:EVA).
Hedge fund interest in Enviva Partners, LP (NYSE:EVA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as GTT Communications Inc (NYSE:GTT), CSW Industrials, Inc. (NASDAQ:CSWI), and The Chefs Warehouse, Inc (NASDAQ:CHEF) to gather more data points. Our calculations also showed that EVA isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 go over the new hedge fund action encompassing Enviva Partners, LP (NYSE:EVA).
What have hedge funds been doing with Enviva Partners, LP (NYSE:EVA)?
At Q2's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EVA over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Enviva Partners, LP (NYSE:EVA) was held by ValueAct Capital, which reported holding $52 million worth of stock at the end of March. It was followed by Ardsley Partners with a $25.2 million position. Other investors bullish on the company included Renaissance Technologies, Becker Drapkin Management, and McKinley Capital Management.
Due to the fact that Enviva Partners, LP (NYSE:EVA) has faced falling interest from the smart money, it's safe to say that there was a specific group of hedge funds that slashed their full holdings heading into Q3. Intriguingly, Matthew Hulsizer's PEAK6 Capital Management sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $0.1 million in call options. Matthew Hulsizer's fund, PEAK6 Capital Management, also dumped its call options, about $0 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Enviva Partners, LP (NYSE:EVA). These stocks are GTT Communications Inc (NYSE:GTT), CSW Industrials, Inc. (NASDAQ:CSWI), The Chefs Warehouse, Inc (NASDAQ:CHEF), and Chase Corporation (NYSEAMEX:CCF). This group of stocks' market values match EVA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTT,18,345241,0 CSWI,19,61434,0 CHEF,9,54993,-1 CCF,8,84745,-1 Average,13.5,136603,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $84 million in EVA's case. CSW Industrials, Inc. (NASDAQ:CSWI) is the most popular stock in this table. On the other hand Chase Corporation (NYSEAMEX:CCF) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Enviva Partners, LP (NYSE:EVA) is even less popular than CCF. 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. A small number of hedge funds were also right about betting on EVA, though not to the same extent, as the stock returned 4% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey