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Eaton Vance Corp (EV): Hedge Funds In Wait-and-See Mode

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Eaton Vance Corp (NYSE:EV).

Hedge fund interest in Eaton Vance Corp (NYSE:EV) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seaboard Corporation (NYSE:SEB), Floor & Decor Holdings, Inc. (NYSE:FND), and Empire State Realty Trust Inc (NYSE:ESRT) to gather more data points. Our calculations also showed that EV 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 a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Managemnet

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action surrounding Eaton Vance Corp (NYSE:EV).

What have hedge funds been doing with Eaton Vance Corp (NYSE:EV)?

Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EV over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Eaton Vance Corp (NYSE:EV), which was worth $58.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $16.7 million worth of shares. GLG Partners, D E Shaw, and Balyasny Asset 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 Quantinno Capital allocated the biggest weight to Eaton Vance Corp (NYSE:EV), around 0.38% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to EV.

Since Eaton Vance Corp (NYSE:EV) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers that slashed their full holdings by the end of the third quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $1.3 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund cut about $1.1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Eaton Vance Corp (NYSE:EV). We will take a look at Seaboard Corporation (NYSE:SEB), Floor & Decor Holdings, Inc. (NYSE:FND), Empire State Realty Trust Inc (NYSE:ESRT), and Liberty Global plc (NASDAQ:LBTYA). This group of stocks’ market values resemble EV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SEB 16 147649 0
FND 23 471890 2
ESRT 9 102681 -3
LBTYA 27 1291972 0
Average 18.75 503548 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $504 million. That figure was $101 million in EV’s case. Liberty Global plc (NASDAQ:LBTYA) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 9 bullish hedge fund positions. Eaton Vance Corp (NYSE:EV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately EV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EV investors were disappointed as the stock returned 5.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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