Is Essent Group Ltd (ESNT) Going to Burn These Hedge Funds?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Essent Group Ltd (NYSE:ESNT).

Essent Group Ltd (NYSE:ESNT) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged and the stock was included in the 13F portfolios of 15 funds tracked by Insider Monkey at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Suburban Propane Partners LP (NYSE:SPH), Electronics For Imaging, Inc. (NASDAQ:EFII), and MGIC Investment Corp. (NYSE:MTG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, let’s check out the key action surrounding Essent Group Ltd (NYSE:ESNT).

What does the smart money think about Essent Group Ltd (NYSE:ESNT)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in Essent Group Ltd (NYSE:ESNT), unchanged over the quarter. Below, you can check out the change in hedge fund sentiment towards ESNT over the last five quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David E. Shaw’s D E Shaw has the biggest position in Essent Group Ltd (NYSE:ESNT), worth close to $32.6 million. The second largest stake is held by Jim Simons’ Renaissance Technologies, which disclosed a $22.4 million position. Some other members of the smart money that are bullish encompass Brian Ashford-Russell and Tim Woolley’s Polar Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Robert B. Gillam’s McKinley Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
On the other hand, several funds decided to close their positions in Essent Group Ltd (NYSE:ESNT) entirely between July and September. George Soros’ Soros Fund Management dumped the largest position of all the hedgies studied by Insider Monkey, totaling an estimated $32.3 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $11.2 million worth.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Essent Group Ltd (NYSE:ESNT) but similarly valued. We will take a look at Suburban Propane Partners LP (NYSE:SPH), Electronics For Imaging, Inc. (NASDAQ:EFII), MGIC Investment Corp. (NYSE:MTG), and Glacier Bancorp, Inc. (NASDAQ:GBCI). This group of stocks’ market caps are closest to ESNT’s market cap.

As you can see these stocks had an average of 14 funds with bullish positions and the average amount invested in these stocks was $201 million, which is higher than the $109 million figure in ESNT’s case. MGIC Investment Corp. (NYSE:MTG) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only four bullish hedge fund positions. Essent Group Ltd (NYSE:ESNT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MGIC Investment Corp. (NYSE:MTG) might be a better candidate to consider taking a long position in.

Disclosure: None