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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Sunrun Inc (NASDAQ:RUN)? The smart money sentiment can provide an answer to this question.
Sunrun Inc (NASDAQ:RUN) was in 37 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 48. RUN has experienced a decrease in activity from the world's largest hedge funds of late. There were 45 hedge funds in our database with RUN positions at the end of the second quarter. Our calculations also showed that RUN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we're going to take a peek at the latest hedge fund action encompassing Sunrun Inc (NASDAQ:RUN).
Andreas Halvorsen of Viking Global
Do Hedge Funds Think RUN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in RUN over the last 25 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Coatue Management was the largest shareholder of Sunrun Inc (NASDAQ:RUN), with a stake worth $418.3 million reported as of the end of September. Trailing Coatue Management was Viking Global, which amassed a stake valued at $387.2 million. Tiger Global Management LLC, Orbis Investment Management, and Point State Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quaero Capital allocated the biggest weight to Sunrun Inc (NASDAQ:RUN), around 3.72% of its 13F portfolio. Autonomy Capital is also relatively very bullish on the stock, setting aside 2.61 percent of its 13F equity portfolio to RUN.
Due to the fact that Sunrun Inc (NASDAQ:RUN) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedgies that decided to sell off their entire stakes heading into Q4. At the top of the heap, Zach Schreiber's Point State Capital dumped the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $92 million in stock, and Glen Kacher's Light Street Capital was right behind this move, as the fund said goodbye to about $36.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Sunrun Inc (NASDAQ:RUN) but similarly valued. We will take a look at Ascendis Pharma A/S (NASDAQ:ASND), Globe Life Inc. (NYSE:GL), Syneos Health, Inc. (NASDAQ:SYNH), Reliance Steel & Aluminum Co. (NYSE:RS), GXO Logistics Inc. (NYSE:GXO), Crocs, Inc. (NASDAQ:CROX), and First Horizon Corporation (NYSE:FHN). This group of stocks' market caps are closest to RUN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASND,23,2827508,-6 GL,27,775771,-1 SYNH,33,474708,0 RS,24,346919,-3 GXO,27,1313274,27 CROX,37,1051423,-3 FHN,24,103547,-3 Average,27.9,984736,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $985 million. That figure was $1678 million in RUN's case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Ascendis Pharma A/S (NASDAQ:ASND) is the least popular one with only 23 bullish hedge fund positions. Sunrun Inc (NASDAQ:RUN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RUN is 70.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately RUN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on RUN were disappointed as the stock returned 4.6% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.