Hedge Funds Never Been This Bullish On Eaton Vance Corp (EV)

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 Eaton Vance Corp (NYSE:EV) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Eaton Vance Corp (NYSE:EV) has experienced an increase in activity from the world’s largest hedge funds in recent months. Eaton Vance Corp (NYSE:EV) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistics is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with EV positions at the end of the first quarter. Our calculations also showed that EV 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.

If you’d ask most shareholders, hedge funds are viewed as slow, old financial tools of the past. While there are greater than 8000 funds in operation at the moment, Our experts look at the upper echelon of this group, around 850 funds. These hedge fund managers watch over the lion’s share of all hedge funds’ total capital, and by paying attention to their matchless stock picks, Insider Monkey has revealed numerous investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 review the key hedge fund action encompassing Eaton Vance Corp (NYSE:EV).

What does smart money think about Eaton Vance Corp (NYSE:EV)?

At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the first quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in EV a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

The largest stake in Eaton Vance Corp (NYSE:EV) was held by Citadel Investment Group, which reported holding $40.9 million worth of stock at the end of September. It was followed by Millennium Management with a $33.6 million position. Other investors bullish on the company included Arrowstreet Capital, Alyeska Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to Eaton Vance Corp (NYSE:EV), around 0.85% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to EV.

As industrywide interest jumped, some big names have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, established the biggest position in Eaton Vance Corp (NYSE:EV). Alyeska Investment Group had $17.7 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $11 million position during the quarter. The following funds were also among the new EV investors: Michael Gelband’s ExodusPoint Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks similar to Eaton Vance Corp (NYSE:EV). We will take a look at IDACORP Inc (NYSE:IDA), Parsley Energy Inc (NYSE:PE), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), The Middleby Corporation (NASDAQ:MIDD), NewMarket Corporation (NYSE:NEU), Silicon Laboratories Inc. (NASDAQ:SLAB), and Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI). This group of stocks’ market caps are similar to EV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IDA 22 250723 -2
PE 39 507552 -6
ARWR 21 235917 -1
MIDD 26 165900 0
NEU 21 139066 1
SLAB 28 97081 8
SHI 3 12561 0
Average 22.9 201257 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $182 million in EV’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Eaton Vance Corp (NYSE:EV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EV is 74.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately EV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EV were disappointed as the stock returned -3.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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