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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Evertec Inc (NYSE:EVTC) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Evertec Inc (NYSE:EVTC) a marvelous investment right now? Hedge funds were turning less bullish. The number of bullish hedge fund bets decreased by 1 recently. Evertec Inc (NYSE:EVTC) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 26. Our calculations also showed that EVTC 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.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Ian Wace of Marshall Wace
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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 let’s take a look at the latest hedge fund action surrounding Evertec Inc (NYSE:EVTC).
Hedge fund activity in Evertec Inc (NYSE:EVTC)
At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards EVTC over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rivulet Capital held the most valuable stake in Evertec Inc (NYSE:EVTC), which was worth $132.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $63 million worth of shares. GLG Partners, Arrowstreet Capital, and Royce & Associates 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 Rivulet Capital allocated the biggest weight to Evertec Inc (NYSE:EVTC), around 8.63% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to EVTC.
Due to the fact that Evertec Inc (NYSE:EVTC) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies who were dropping their full holdings last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the largest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $0.8 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund sold off about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Evertec Inc (NYSE:EVTC). These stocks are Ryder System, Inc. (NYSE:R), Twist Bioscience Corporation (NASDAQ:TWST), Covetrus, Inc. (NASDAQ:CVET), ChampionX Corporation (NYSE:CHX), First Interstate Bancsystem Inc (NASDAQ:FIBK), Uniqure NV (NASDAQ:QURE), and Barnes Group Inc. (NYSE:B). This group of stocks’ market valuations resemble EVTC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| R | 20 | 202663 | 2 |
| TWST | 19 | 318287 | 3 |
| CVET | 24 | 210441 | 2 |
| CHX | 30 | 452274 | 11 |
| FIBK | 12 | 20747 | 5 |
| QURE | 49 | 595039 | 5 |
| B | 19 | 39170 | 8 |
| Average | 24.7 | 262660 | 5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $245 million in EVTC’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 12 bullish hedge fund positions. Evertec Inc (NYSE:EVTC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EVTC is 32.9. 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 September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on EVTC as the stock returned 23.7% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
