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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Enable Midstream Partners LP (NYSE:ENBL) changed recently.
Enable Midstream Partners LP (NYSE:ENBL) investors should be aware of a decrease in activity from the world's largest hedge funds of late. Enable Midstream Partners LP (NYSE:ENBL) was in 4 hedge funds' portfolios at the end of September. The all time high for this statistics is 9. There were 5 hedge funds in our database with ENBL holdings at the end of June. Our calculations also showed that ENBL 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.
Emanuel Friedman of EJF Capital
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 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. Keeping this in mind let's view the fresh hedge fund action encompassing Enable Midstream Partners LP (NYSE:ENBL).
How are hedge funds trading Enable Midstream Partners LP (NYSE:ENBL)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ENBL over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the most valuable position in Enable Midstream Partners LP (NYSE:ENBL), worth close to $7.4 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Appaloosa Management LP, managed by David Tepper, which holds a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Ken Griffin's Citadel Investment Group, Ken Griffin's Citadel Investment Group and Emanuel J. Friedman's EJF Capital. In terms of the portfolio weights assigned to each position Appaloosa Management LP allocated the biggest weight to Enable Midstream Partners LP (NYSE:ENBL), around 0.02% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to ENBL.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ENBL as a viable investment and initiated a position in the stock.
Let's now take a look at hedge fund activity in other stocks similar to Enable Midstream Partners LP (NYSE:ENBL). We will take a look at Callaway Golf Company (NYSE:ELY), Studio City International Holdings Limited (NYSE:MSC), Four Corners Property Trust, Inc. (NYSE:FCPT), Coeur Mining, Inc. (NYSE:CDE), Jack in the Box Inc. (NASDAQ:JACK), Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), and Cerence Inc. (NASDAQ:CRNC). This group of stocks' market valuations are closest to ENBL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELY,32,390873,8 MSC,3,277757,0 FCPT,13,67476,-6 CDE,15,44740,1 JACK,38,314788,7 OMAB,7,28689,3 CRNC,12,135180,-2 Average,17.1,179929,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $9 million in ENBL's case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. Enable Midstream Partners LP (NYSE:ENBL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ENBL is 18.8. 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 November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ENBL as the stock returned 29.5% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.