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Did Hedge Funds Drop The Ball On Envestnet Inc (ENV) ?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Envestnet Inc (NYSE:ENV).

Is Envestnet Inc (NYSE:ENV) the right investment to pursue these days? The smart money is becoming less confident. The number of bullish hedge fund bets shrunk by 1 recently. Our calculations also showed that ENV isn’t among the 30 most popular stocks among hedge funds. ENV was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 13 hedge funds in our database with ENV holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Atterbury - Whetstone Capital

Let’s view the new hedge fund action encompassing Envestnet Inc (NYSE:ENV).

What have hedge funds been doing with Envestnet Inc (NYSE:ENV)?

At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ENV over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

ENV_apr2019

More specifically, Select Equity Group was the largest shareholder of Envestnet Inc (NYSE:ENV), with a stake worth $33.6 million reported as of the end of September. Trailing Select Equity Group was Echo Street Capital Management, which amassed a stake valued at $22.4 million. Impax Asset Management, Whetstone Capital Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Because Envestnet Inc (NYSE:ENV) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of hedgies that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Howard Marks’s Oaktree Capital Management cut the biggest position of the 700 funds monitored by Insider Monkey, valued at about $5.6 million in stock. Jim Simons’s fund, Renaissance Technologies, also sold off its stock, about $4.1 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Envestnet Inc (NYSE:ENV). We will take a look at Sensient Technologies Corporation (NYSE:SXT), HMS Holdings Corp. (NASDAQ:HMSY), Transportadora de Gas del Sur SA (NYSE:TGS), and AmeriGas Partners, L.P. (NYSE:APU). This group of stocks’ market valuations resemble ENV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SXT 15 85054 4
HMSY 22 134551 6
TGS 8 42096 -1
APU 4 18074 -2
Average 12.25 69944 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $83 million in ENV’s case. HMS Holdings Corp. (NASDAQ:HMSY) is the most popular stock in this table. On the other hand AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 4 bullish hedge fund positions. Envestnet Inc (NYSE:ENV) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ENV as the stock returned 42.5% and outperformed the market by an even larger margin.

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

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