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Bottomline Technologies (de), Inc. (EPAY): Are Hedge Funds Right About This Stock?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Bottomline Technologies (de), Inc.(NASDAQ:EPAY) based on those filings.

Bottomline Technologies (de), Inc. (NASDAQ:EPAY) investors should pay attention to an increase in hedge fund sentiment lately. EPAY was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 17 hedge funds in our database with EPAY positions at the end of the previous quarter. Our calculations also showed that EPAY 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the recent hedge fund action surrounding Bottomline Technologies (de), Inc. (NASDAQ:EPAY).

How have hedgies been trading Bottomline Technologies (de), Inc. (NASDAQ:EPAY)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in EPAY a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, MIG Capital was the largest shareholder of Bottomline Technologies (de), Inc. (NASDAQ:EPAY), with a stake worth $37.1 million reported as of the end of September. Trailing MIG Capital was D E Shaw, which amassed a stake valued at $9.2 million. Citadel Investment Group, Fisher Asset Management, and Intrinsic Edge Capital 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 MIG Capital allocated the biggest weight to Bottomline Technologies (de), Inc.(NASDAQ:EPAY), around 4.37% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, designating 1.22 percent of its 13F equity portfolio to EPAY.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Intrinsic Edge Capital, managed by Mark Coe, assembled the most valuable position in Bottomline Technologies (de), Inc. (NASDAQ:EPAY). Intrinsic Edge Capital had $5.2 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new EPAY positions are Paul Tudor Jones’s Tudor Investment Corp, Noam Gottesman’s GLG Partners, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bottomline Technologies (de), Inc. (NASDAQ:EPAY) but similarly valued. We will take a look at Goosehead Insurance, Inc. (NASDAQ:GSHD), Alliance Data Systems Corporation (NYSE:ADS), Plexus Corp. (NASDAQ:PLXS), and Turning Point Therapeutics, Inc. (NASDAQ:TPTX). This group of stocks’ market valuations match EPAY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GSHD 11 62673 2
ADS 30 245871 -15
PLXS 16 63502 -8
TPTX 19 360455 -4
Average 19 183125 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $73 million in EPAY’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 11 bullish hedge fund positions. Bottomline Technologies (de), Inc. (NASDAQ:EPAY) is not the least popular stock in this group but hedge fund interest is still below 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on EPAY as the stock returned 38.3% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.