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Did Hedge Funds Make The Right Call On Edgewell Personal Care Company (EPC) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Edgewell Personal Care Company (NYSE:EPC) and determine whether hedge funds had an edge regarding this stock.

Is Edgewell Personal Care Company (NYSE:EPC) the right investment to pursue these days? The best stock pickers were getting less optimistic. The number of long hedge fund bets went down by 1 recently. Our calculations also showed that EPC 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.

Today there are a lot of signals investors employ to value publicly traded companies. Two of the best signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce their index-focused peers by a solid amount (see the details here).

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to analyze the latest hedge fund action encompassing Edgewell Personal Care Company (NYSE:EPC).

How are hedge funds trading Edgewell Personal Care Company (NYSE:EPC)?

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in EPC a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, GAMCO Investors held the most valuable stake in Edgewell Personal Care Company (NYSE:EPC), which was worth $58.5 million at the end of the third quarter. On the second spot was Tremblant Capital which amassed $33.9 million worth of shares. Armistice Capital, Candlestick Capital Management, and Armistice 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 Clearline Capital allocated the biggest weight to Edgewell Personal Care Company (NYSE:EPC), around 4.76% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, earmarking 2.13 percent of its 13F equity portfolio to EPC.

Because Edgewell Personal Care Company (NYSE:EPC) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, George Soros’s Soros Fund Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $31.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $7.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Edgewell Personal Care Company (NYSE:EPC). These stocks are BioTelemetry, Inc. (NASDAQ:BEAT), Office Properties Income Trust (NASDAQ:OPI), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), and RLJ Lodging Trust (NYSE:RLJ). This group of stocks’ market values are closest to EPC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEAT 12 42629 -3
OPI 10 20479 1
CNST 25 427184 -2
RLJ 20 55694 3
Average 16.75 136497 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $177 million in EPC’s case. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the most popular stock in this table. On the other hand Office Properties Income Trust (NASDAQ:OPI) is the least popular one with only 10 bullish hedge fund positions. Edgewell Personal Care Company (NYSE:EPC) is not the most popular stock in this group but hedge fund interest is still above 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on EPC as the stock returned 29.4% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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