In this article we will check out the progression of hedge fund sentiment towards Plug Power, Inc. (NASDAQ:PLUG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Plug Power, Inc. (NASDAQ:PLUG) investors should pay attention to an increase in support from the world’s most elite money managers of late. Our calculations also showed that PLUG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action regarding Plug Power, Inc. (NASDAQ:PLUG).
How are hedge funds trading Plug Power, Inc. (NASDAQ:PLUG)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in PLUG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Odey Asset Management Group was the largest shareholder of Plug Power, Inc. (NASDAQ:PLUG), with a stake worth $27.7 million reported as of the end of September. Trailing Odey Asset Management Group was D E Shaw, which amassed a stake valued at $22.1 million. Intrinsic Edge Capital, Driehaus Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 4.6% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 1.97 percent of its 13F equity portfolio to PLUG.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, assembled the largest position in Plug Power, Inc. (NASDAQ:PLUG). Driehaus Capital had $10.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $6.8 million investment in the stock during the quarter. The other funds with brand new PLUG positions are Highbridge Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Plug Power, Inc. (NASDAQ:PLUG) but similarly valued. These stocks are New Frontier Health Corporation (NYSE:NFH), Inovio Pharmaceuticals Inc (NASDAQ:INO), Urban Edge Properties (NYSE:UE), and PennyMac Mortgage Investment Trust (NYSE:PMT). This group of stocks’ market valuations are similar to PLUG’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFH,16,172547,4 INO,8,22544,3 UE,21,68712,2 PMT,12,56020,-7 Average,14.25,79956,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $92 million in PLUG’s case. Urban Edge Properties (NYSE:UE) is the most popular stock in this table. On the other hand Inovio Pharmaceuticals Inc (NASDAQ:INO) is the least popular one with only 8 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 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on PLUG as the stock returned 107.6% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.