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Did Hedge Funds Make The Right Call On Envestnet Inc (ENV) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Envestnet Inc (NYSE:ENV) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Envestnet Inc (NYSE:ENV) shareholders have witnessed a decrease in hedge fund sentiment in recent months. ENV was in 17 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with ENV holdings at the end of the previous quarter. Our calculations also showed that ENV 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.

At the moment there are many metrics shareholders put to use to value their holdings. A pair of the most underrated metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outclass the S&P 500 by a healthy margin (see the details here).

YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to view the fresh hedge fund action regarding Envestnet Inc (NYSE:ENV).

How have hedgies been trading Envestnet Inc (NYSE:ENV)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ENV over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Envestnet Inc (NYSE:ENV) was held by York Capital Management, which reported holding $24.5 million worth of stock at the end of September. It was followed by Millennium Management with a $8.7 million position. Other investors bullish on the company included Greenhouse Funds, Whetstone Capital Advisors, and Strycker View Capital. In terms of the portfolio weights assigned to each position Strycker View Capital allocated the biggest weight to Envestnet Inc (NYSE:ENV), around 7.85% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, dishing out 2.85 percent of its 13F equity portfolio to ENV.

Due to the fact that Envestnet Inc (NYSE:ENV) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedge funds who were dropping their full holdings last quarter. Interestingly, Robert Joseph Caruso’s Select Equity Group dropped the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $15 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund dumped about $3.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Envestnet Inc (NYSE:ENV). We will take a look at Vertiv Holdings Co (NYSE:VRT), Continental Resources, Inc. (NYSE:CLR), Stantec Inc. (NYSE:STN), and Brixmor Property Group Inc (NYSE:BRX). All of these stocks’ market caps are similar to ENV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRT 39 540556 4
CLR 26 66933 -12
STN 12 52596 3
BRX 28 79124 12
Average 26.25 184802 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $75 million in ENV’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 12 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 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on ENV as the stock returned 49.8% since the end of March and outperformed the market by an even larger margin.

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