The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Encore Wire Corporation (NASDAQ:WIRE) and determine whether the smart money was really smart about this stock.
Is Encore Wire Corporation (NASDAQ:WIRE) a buy here? Prominent investors were getting more bullish. The number of long hedge fund bets increased by 6 lately. Encore Wire Corporation (NASDAQ:WIRE) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WIRE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of formulas investors have at their disposal to evaluate publicly traded companies. Two of the most useful formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top investment managers can outperform the market by a solid amount (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to take a glance at the new hedge fund action encompassing Encore Wire Corporation (NASDAQ:WIRE).
What does smart money think about Encore Wire Corporation (NASDAQ:WIRE)?
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WIRE over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the largest position in Encore Wire Corporation (NASDAQ:WIRE), worth close to $6.5 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $5.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, David Harding's Winton Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Encore Wire Corporation (NASDAQ:WIRE), around 1.28% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.6 percent of its 13F equity portfolio to WIRE.
Now, key hedge funds have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, created the most valuable position in Encore Wire Corporation (NASDAQ:WIRE). Engineers Gate Manager had $1.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Matthew Hulsizer's PEAK6 Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Encore Wire Corporation (NASDAQ:WIRE) but similarly valued. We will take a look at BrightSphere Investment Group Inc (NYSE:BSIG), Lindsay Corporation (NYSE:LNN), Avidity Biosciences, Inc. (NASDAQ:RNA), Meridian Bioscience, Inc. (NASDAQ:VIVO), United Natural Foods, Inc. (NYSE:UNFI), SilverCrest Metals Inc. (NYSE:SILV), and Archrock, Inc. (NYSE:AROC). This group of stocks' market valuations resemble WIRE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BSIG,22,345683,2 LNN,11,158723,0 RNA,24,334500,24 VIVO,23,173955,3 UNFI,21,62895,3 SILV,9,104921,0 AROC,12,23184,1 Average,17.4,171980,4.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $40 million in WIRE's case. Avidity Biosciences, Inc. (NASDAQ:RNA) is the most popular stock in this table. On the other hand SilverCrest Metals Inc. (NYSE:SILV) is the least popular one with only 9 bullish hedge fund positions. Encore Wire Corporation (NASDAQ:WIRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WIRE is 40. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately WIRE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WIRE were disappointed as the stock returned -4.9% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.