Hedge Funds Aren’t Crazy About e.l.f. Beauty, Inc. (ELF) Anymore

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards e.l.f. Beauty, Inc. (NYSE:ELF).

e.l.f. Beauty, Inc. (NYSE:ELF) was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 29. ELF investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 29 hedge funds in our database with ELF holdings at the end of December. Our calculations also showed that ELF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s review the latest hedge fund action surrounding e.l.f. Beauty, Inc. (NYSE:ELF).

Do Hedge Funds Think ELF Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ELF over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is ELF A Good Stock To Buy?

The largest stake in e.l.f. Beauty, Inc. (NYSE:ELF) was held by Renaissance Technologies, which reported holding $34.1 million worth of stock at the end of December. It was followed by Portolan Capital Management with a $23.7 million position. Other investors bullish on the company included Marathon Partners, Bayberry Capital Partners, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to e.l.f. Beauty, Inc. (NYSE:ELF), around 8.68% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, dishing out 5.98 percent of its 13F equity portfolio to ELF.

Seeing as e.l.f. Beauty, Inc. (NYSE:ELF) has faced declining sentiment from the smart money, it’s safe to say that there were a few hedge funds that decided to sell off their full holdings by the end of the first quarter. Interestingly, Daniel Lascano’s Lomas Capital Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $39.3 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund dumped about $23.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to e.l.f. Beauty, Inc. (NYSE:ELF). We will take a look at Calavo Growers, Inc. (NASDAQ:CVGW), H&E Equipment Services, Inc. (NASDAQ:HEES), Ouster, Inc. (NYSE:OUST), 17 Education & Technology Group Inc. (NASDAQ:YQ), Ebang International Holdings Inc. (NASDAQ:EBON), FBL Financial Group (NYSE:FFG), and nLIGHT, Inc. (NASDAQ:LASR). This group of stocks’ market values resemble ELF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVGW 9 64050 -1
HEES 14 67670 -3
OUST 19 129618 19
YQ 7 7440 -6
EBON 8 9048 5
FFG 7 19941 -1
LASR 18 82278 -2
Average 11.7 54292 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $139 million in ELF’s case. Ouster, Inc. (NYSE:OUST) is the most popular stock in this table. On the other hand 17 Education & Technology Group Inc. (NASDAQ:YQ) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks e.l.f. Beauty, Inc. (NYSE:ELF) is more popular among hedge funds. Our overall hedge fund sentiment score for ELF is 68.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately ELF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ELF were disappointed as the stock returned -5% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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