Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Plug Power, Inc. (NASDAQ:PLUG).
Is PLUG a good stock to buy now? Plug Power, Inc. (NASDAQ:PLUG) investors should be aware of an increase in support from the world's most elite money managers of late. Plug Power, Inc. (NASDAQ:PLUG) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with PLUG positions at the end of the second quarter. Our calculations also showed that PLUG isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Crispin Odey of Odey Asset Management Group
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a look at the new hedge fund action regarding Plug Power, Inc. (NASDAQ:PLUG).
Do Hedge Funds Think PLUG Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in PLUG a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Plug Power, Inc. (NASDAQ:PLUG) was held by D E Shaw, which reported holding $246 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $23.9 million position. Other investors bullish on the company included Columbus Circle Investors, Odey Asset Management Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to Plug Power, Inc. (NASDAQ:PLUG), around 2.82% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, designating 1.08 percent of its 13F equity portfolio to PLUG.
As aggregate interest increased, specific money managers have jumped into Plug Power, Inc. (NASDAQ:PLUG) headfirst. Renaissance Technologies, created the largest position in Plug Power, Inc. (NASDAQ:PLUG). Renaissance Technologies had $10.8 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $7.3 million position during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Peter Muller's PDT Partners, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Plug Power, Inc. (NASDAQ:PLUG) but similarly valued. These stocks are SiteOne Landscape Supply, Inc. (NYSE:SITE), The AZEK Company Inc. (NYSE:AZEK), Corelogic Inc (NYSE:CLGX), BWX Technologies Inc (NYSE:BWXT), Pearson PLC (NYSE:PSO), CACI International Inc (NYSE:CACI), and Planet Fitness Inc (NYSE:PLNT). This group of stocks' market values are similar to PLUG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SITE,28,96129,10 AZEK,34,489399,8 CLGX,45,1712392,10 BWXT,21,166407,-6 PSO,5,16445,-2 CACI,31,575408,-3 PLNT,45,1552569,1 Average,29.9,658393,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $658 million. That figure was $389 million in PLUG's case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 5 bullish hedge fund positions. Plug Power, Inc. (NASDAQ:PLUG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLUG is 56. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on PLUG as the stock returned 91.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.