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Did Hedge Funds Drop The Ball On Everi Holdings Inc (EVRI) ?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Everi Holdings Inc (NYSE:EVRI) has experienced a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that EVRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are plenty of methods shareholders employ to appraise publicly traded companies. A duo of the best methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outclass their index-focused peers by a very impressive amount (see the details here).

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the fresh hedge fund action encompassing Everi Holdings Inc (NYSE:EVRI).

What does smart money think about Everi Holdings Inc (NYSE:EVRI)?

Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EVRI over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

EVRI_dec2019

Among these funds, Indaba Capital Management held the most valuable stake in Everi Holdings Inc (NYSE:EVRI), which was worth $59.3 million at the end of the third quarter. On the second spot was Private Capital Management which amassed $28.9 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Millennium Management 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 Indaba Capital Management allocated the biggest weight to Everi Holdings Inc (NYSE:EVRI), around 13.86% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, designating 11.11 percent of its 13F equity portfolio to EVRI.

Due to the fact that Everi Holdings Inc (NYSE:EVRI) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $2.1 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also cut its stock, about $0.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Everi Holdings Inc (NYSE:EVRI). These stocks are Ellington Financial Inc. (NYSE:EFC), Simulations Plus, Inc. (NASDAQ:SLP), Evolent Health Inc (NYSE:EVH), and United Natural Foods, Inc. (NYSE:UNFI). This group of stocks’ market caps are similar to EVRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EFC 7 46892 -2
SLP 14 40148 5
EVH 16 115507 0
UNFI 10 35452 -4
Average 11.75 59500 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $164 million in EVRI’s case. Evolent Health Inc (NYSE:EVH) is the most popular stock in this table. On the other hand Ellington Financial Inc. (NYSE:EFC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Everi Holdings Inc (NYSE:EVRI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on EVRI as the stock returned 59.2% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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