Is Epsilon Energy Ltd. (EPSN) A Good Stock To Buy?
Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Epsilon Energy Ltd. (NASDAQ:EPSN) to find out whether there were any major changes in hedge funds' views.
Is EPSN a good stock to buy? Epsilon Energy Ltd. (NASDAQ:EPSN) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. Epsilon Energy Ltd. (NASDAQ:EPSN) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 4. Our calculations also showed that EPSN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a peek at the fresh hedge fund action surrounding Epsilon Energy Ltd. (NASDAQ:EPSN).
Do Hedge Funds Think EPSN Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EPSN over the last 23 quarters. So, let's examine 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, Frederick Tucker Golden's Solas Capital Management has the number one position in Epsilon Energy Ltd. (NASDAQ:ESPN), worth close to $15.3 million, amounting to 12.8% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Solas Capital Management allocated the biggest weight to Epsilon Energy Ltd. (NASDAQ:ESPN), around 12.85% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0002 percent of its 13F equity portfolio to EPSN.
As industrywide interest jumped, specific money managers have jumped into Epsilon Energy Ltd. (NASDAQ:ESPN) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Epsilon Energy Ltd. (NASDAQ:ESPN). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Epsilon Energy Ltd. (NASDAQ:ESPN) but similarly valued. We will take a look at Consumer Portfolio Services, Inc. (NASDAQ:CPSS), AIM ImmunoTech Inc. (NYSE:AIM), Affinity Bancshares, Inc. (NASDAQ:AFBI), voxeljet AG (NASDAQ:VJET), Fury Gold Mines Limited (NYSE:FURY), Kingstone Companies Inc (NASDAQ:KINS), and Ault Global Holdings, Inc. (NYSE:DPW). This group of stocks' market caps are closest to EPSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPSS,1,2007,0 AIM,4,1450,4 AFBI,1,1584,1 VJET,1,378,1 FURY,3,1220,-1 KINS,1,4109,0 DPW,3,1915,2 Average,2,1809,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $15 million in EPSN's case. AIM ImmunoTech Inc. (NYSE:AIM) is the most popular stock in this table. On the other hand Consumer Portfolio Services, Inc. (NASDAQ:CPSS) is the least popular one with only 1 bullish hedge fund positions. Epsilon Energy Ltd. (NASDAQ:ESPN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPSN is 61.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on EPSN as the stock returned 9% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
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