"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on EnCana Corporation (NYSE:ECA) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is EnCana Corporation (NYSE:ECA) a buy, sell, or hold? The smart money is in a pessimistic mood. The number of bullish hedge fund positions dropped by 7 recently. Our calculations also showed that ECA 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.
In today’s marketplace there are numerous tools shareholders put to use to assess stocks. A couple of the less utilized tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outpace the S&P 500 by a very impressive margin (see the details here).
[caption id="attachment_758477" align="aligncenter" width="450"] Andy Redleaf of Whitebox Advisors[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's review the new hedge fund action surrounding EnCana Corporation (NYSE:ECA).
How have hedgies been trading EnCana Corporation (NYSE:ECA)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in ECA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in EnCana Corporation (NYSE:ECA). Renaissance Technologies has a $81.7 million position in the stock, comprising 0.1% of its 13F portfolio. On Renaissance Technologies's heels is John Overdeck and David Siegel of Two Sigma Advisors, with a $55.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise Andy Redleaf's Whitebox Advisors, Phill Gross and Robert Atchinson's Adage Capital Management and Paul Marshall and Ian Wace's Marshall Wace. In terms of the portfolio weights assigned to each position Southport Management allocated the biggest weight to EnCana Corporation (NYSE:ECA), around 3.88% of its portfolio. Whitebox Advisors is also relatively very bullish on the stock, dishing out 1.27 percent of its 13F equity portfolio to ECA.
Judging by the fact that EnCana Corporation (NYSE:ECA) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedge funds that elected to cut their full holdings in the third quarter. Intriguingly, Vince Maddi and Shawn Brennan's SIR Capital Management sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $22.4 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $17.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 7 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as EnCana Corporation (NYSE:ECA) but similarly valued. We will take a look at EPR Properties (NYSE:EPR), Vipshop Holdings Limited (NYSE:VIPS), RealPage, Inc. (NASDAQ:RP), and Casey's General Stores, Inc. (NASDAQ:CASY). This group of stocks' market caps are similar to ECA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EPR,18,201024,-2 VIPS,22,244059,5 RP,31,569288,-2 CASY,16,103612,-2 Average,21.75,279496,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $262 million in ECA's case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Casey's General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 16 bullish hedge fund positions. EnCana Corporation (NYSE:ECA) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately ECA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ECA were disappointed as the stock returned -14.3% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.