Everi Holdings Inc (EVRI): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Everi Holdings Inc (NYSE:EVRI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Everi Holdings Inc (NYSE:EVRI) worth your attention right now? Prominent investors were getting less optimistic. The number of bullish hedge fund positions fell by 1 recently. Everi Holdings Inc (NYSE:EVRI) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 30. Our calculations also showed that EVRI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jason Ader - Springowl Associates

Jason Ader of Cumberland Associates / Springowl Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to analyze the new hedge fund action surrounding Everi Holdings Inc (NYSE:EVRI).

How are hedge funds trading Everi Holdings Inc (NYSE:EVRI)?

At second quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in EVRI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, Millennium Management was the largest shareholder of Everi Holdings Inc (NYSE:EVRI), with a stake worth $14.9 million reported as of the end of September. Trailing Millennium Management was Indaba Capital Management, which amassed a stake valued at $14.8 million. Renaissance Technologies, Private Capital Management, and DG Capital 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 DG Capital Management allocated the biggest weight to Everi Holdings Inc (NYSE:EVRI), around 6.53% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 5.61 percent of its 13F equity portfolio to EVRI.

Because Everi Holdings Inc (NYSE:EVRI) has witnessed falling interest from the aggregate hedge fund industry, we can see that there exists a select few money managers who sold off their full holdings heading into Q3. At the top of the heap, Ryan Caldwell’s Chiron Investment Management dropped the largest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $3.3 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Everi Holdings Inc (NYSE:EVRI). These stocks are CooTek (Cayman) Inc. (NYSE:CTK), Xenon Pharmaceuticals Inc (NASDAQ:XENE), First Mid Bancshares, Inc. (NASDAQ:FMBH), MEI Pharma Inc (NASDAQ:MEIP), American Public Education, Inc. (NASDAQ:APEI), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), and Establishment Labs Holdings Inc. (NASDAQ:ESTA). This group of stocks’ market caps resemble EVRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTK 2 1118 1
XENE 27 226167 -1
FMBH 3 3665 -2
MEIP 20 82574 6
APEI 16 75539 3
BDSI 26 112350 -1
ESTA 11 78982 -3
Average 15 82914 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $85 million in EVRI’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand CooTek (Cayman) Inc. (NYSE:CTK) is the least popular one with only 2 bullish hedge fund positions. Everi Holdings Inc (NYSE:EVRI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EVRI is 69. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on EVRI as the stock returned 59.9% during Q3 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.