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 Everbridge, Inc. (NASDAQ:EVBG) and determine whether hedge funds skillfully traded this stock.
Is Everbridge, Inc. (NASDAQ:EVBG) going to take off soon? Money managers were selling. The number of long hedge fund bets were trimmed by 6 lately. Our calculations also showed that EVBG 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). EVBG was in 31 hedge funds’ portfolios at the end of March. There were 37 hedge funds in our database with EVBG positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 we are checking out this tiny lithium stock. With all of this in mind we’re going to analyze the fresh hedge fund action encompassing Everbridge, Inc. (NASDAQ:EVBG).
How have hedgies been trading Everbridge, Inc. (NASDAQ:EVBG)?
Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EVBG over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Everbridge, Inc. (NASDAQ:EVBG), which was worth $360.6 million at the end of the third quarter. On the second spot was Sylebra Capital Management which amassed $168.5 million worth of shares. Polar Capital, Motley Fool Asset Management, and Driehaus 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 Cota Capital allocated the biggest weight to Everbridge, Inc. (NASDAQ:EVBG), around 8.59% of its 13F portfolio. Alta Park Capital is also relatively very bullish on the stock, setting aside 7.21 percent of its 13F equity portfolio to EVBG.
Due to the fact that Everbridge, Inc. (NASDAQ:EVBG) has witnessed bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of funds that slashed their full holdings last quarter. It’s worth mentioning that David Gallo’s Valinor Management LLC sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $35.8 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also sold off its stock, about $9.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 6 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Everbridge, Inc. (NASDAQ:EVBG) but similarly valued. These stocks are Helen of Troy Limited (NASDAQ:HELE), Healthequity Inc (NASDAQ:HQY), BridgeBio Pharma, Inc. (NASDAQ:BBIO), and eHealth, Inc. (NASDAQ:EHTH). This group of stocks’ market valuations are similar to EVBG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $464 million. That figure was $797 million in EVBG’s case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 12 bullish hedge fund positions. Everbridge, Inc. (NASDAQ:EVBG) 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 EVBG as the stock returned 30.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.