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Did Hedge Funds Make The Right Call On Endo International plc (ENDP) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Endo International plc (NASDAQ:ENDP) and determine whether hedge funds skillfully traded this stock.

Endo International plc (NASDAQ:ENDP) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that ENDP 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.

GLENVIEW CAPITAL

Larry Robbins of Glenview Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 let’s take a peek at the key hedge fund action surrounding Endo International plc (NASDAQ:ENDP).

What does smart money think about Endo International plc (NASDAQ:ENDP)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in ENDP a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Endo International plc (NASDAQ:ENDP), which was worth $58 million at the end of the third quarter. On the second spot was Miller Value Partners which amassed $48.4 million worth of shares. Glenview Capital, Paulson & Co, and Slate Path 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 Miller Value Partners allocated the biggest weight to Endo International plc (NASDAQ:ENDP), around 3.11% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 1.36 percent of its 13F equity portfolio to ENDP.

Consequently, some big names have jumped into Endo International plc (NASDAQ:ENDP) headfirst. Centerbridge Partners, managed by Mark T. Gallogly, assembled the most outsized position in Endo International plc (NASDAQ:ENDP). Centerbridge Partners had $2.2 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $1.6 million position during the quarter. The other funds with brand new ENDP positions are Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Michael Gelband’s ExodusPoint Capital, and Jonathan Soros’s JS Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Endo International plc (NASDAQ:ENDP) but similarly valued. We will take a look at OneSmart International Education Group Limited (NYSE:ONE), Cadence Bancorporation (NYSE:CADE), Rite Aid Corporation (NYSE:RAD), and istar Inc (NYSE:STAR). All of these stocks’ market caps resemble ENDP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONE 7 64491 -1
CADE 29 66003 7
RAD 16 45558 6
STAR 14 111654 -1
Average 16.5 71927 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $214 million in ENDP’s case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand OneSmart International Education Group Limited (NYSE:ONE) is the least popular one with only 7 bullish hedge fund positions. Endo International plc (NASDAQ:ENDP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market by 15.5 percentage points. Unfortunately ENDP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ENDP were disappointed as the stock returned -7.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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