Should You Follow Hedge Funds Into Evertec Inc (EVTC)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Evertec Inc (NYSE:EVTC) a superb investment today? The best stock pickers are getting more bullish. The number of bullish hedge fund positions rose by 3 in recent months. EVTC was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with EVTC holdings at the end of the previous quarter. 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 Moelis & Co (NYSE:MC), Quad/Graphics, Inc. (NYSE:QUAD), and Celestica Inc. (USA) (NYSE:CLS) 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.

What have hedge funds been doing with Evertec Inc (NYSE:EVTC)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 19% rise from the second quarter of 2016. After a sharp drop in Q4 2015, hedge fund ownership has rebounded in 2016 to reach a yearly high at the end of September. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Fine Capital Partners, managed by Debra Fine, holds the largest position in Evertec Inc (NYSE:EVTC). Fine Capital Partners has a $116.3 million position in the stock, comprising 11.9% of its 13F portfolio. Sitting at the No. 2 spot is Barry Lebovits and Joshua Kuntz of Rivulet Capital, with a $46.9 million position; 9.6% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Jim Simons’ Renaissance Technologies, D E Shaw, and Thomas Ellis and Todd Hammer’s North Run Capital.

Consequently, key hedge funds have been driving this bullishness. Polaris Capital Management, managed by Bernard Horn, initiated the largest position in Evertec Inc (NYSE:EVTC). Polaris Capital Management had $1.5 million invested in the company at the end of the quarter. Brian Taylor’s Pine River Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with brand new EVTC positions are Glenn Russell Dubin’s Highbridge Capital Management, Paul Tudor Jones’ Tudor Investment Corp, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s check out hedge fund activity in other stocks similar to Evertec Inc (NYSE:EVTC). These stocks are Moelis & Co (NYSE:MC), Quad/Graphics, Inc. (NYSE:QUAD), Celestica Inc. (USA) (NYSE:CLS), and Nationstar Mortgage Holdings Inc (NYSE:NSM). This group of stocks’ market caps resemble EVTC’s market cap.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $257 million in EVTC’s case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Moelis & Co (NYSE:MC) is the least popular one with only 10 bullish hedge fund positions. Evertec Inc (NYSE:EVTC) is not the most popular stock in this group but hedge fund interest is still above average and it has more money invested in it that any of those stocks. This is a positive signal, as is the steady rise in hedge fund ownership, given that we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EVTC might be a good candidate to consider a long position in.

Disclosure: None