The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Plug Power, Inc. (NASDAQ:PLUG) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Plug Power, Inc. (NASDAQ:PLUG) the right investment to pursue these days? Hedge funds were turning bullish. The number of long hedge fund bets rose by 5 lately. Plug Power, Inc. (NASDAQ:PLUG) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. In a recent investor letter Lakewood Capital shared its short PLUG thesis. It seems like other hedge funds don’t agree with Lakewood Capital. Nevertheless our calculations also showed that PLUG 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). There were 15 hedge funds in our database with PLUG holdings at the end of March. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 after its stock price crashed. 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 let’s take a gander at the fresh hedge fund action surrounding Plug Power, Inc. (NASDAQ:PLUG).
Hedge fund activity in Plug Power, Inc. (NASDAQ:PLUG)
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PLUG over the last 20 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in Plug Power, Inc. (NASDAQ:PLUG). D E Shaw has a $107.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Odey Asset Management Group, led by Crispin Odey, holding a $44.7 million position; the fund has 7.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Israel Englander’s Millennium Management, Mark Coe’s Intrinsic Edge Capital and Richard Driehaus’s Driehaus Capital. 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 7.68% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 2.51 percent of its 13F equity portfolio to PLUG.
As industrywide interest jumped, specific money managers have been driving this bullishness. SG Capital Management, managed by Ken Grossman and Glen Schneider, created the most valuable position in Plug Power, Inc. (NASDAQ:PLUG). SG Capital Management had $8.7 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $6.5 million position during the quarter. The other funds with new positions in the stock are Bruce Kovner’s Caxton Associates LP, David Harding’s Winton Capital Management, and Philip Hempleman’s Ardsley Partners.
Let’s now review hedge fund activity in other stocks similar to Plug Power, Inc. (NASDAQ:PLUG). These stocks are John Bean Technologies Corporation (NYSE:JBT), Advanced Disposal Services, Inc. (NYSE:ADSW), BlackBerry Limited (NYSE:BB), FireEye Inc (NASDAQ:FEYE), National Health Investors Inc (NYSE:NHI), WD-40 Company (NASDAQ:WDFC), and Companhia Siderurgica Nacional (NYSE:SID). This group of stocks’ market caps match PLUG’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBT,16,93148,4 ADSW,25,719995,4 BB,22,347261,0 FEYE,28,256703,-4 NHI,15,94170,2 WDFC,15,187292,-2 SID,7,9332,2 Average,18.3,243986,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $272 million in PLUG’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. Plug Power, Inc. (NASDAQ:PLUG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PLUG 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. 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 third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on PLUG as the stock returned 63.3% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.