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 Evercore Inc. (NYSE:EVR) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Evercore Inc. (NYSE:EVR) ready to rally soon? Hedge funds were in a pessimistic mood. The number of long hedge fund bets fell by 4 lately. Evercore Inc. (NYSE:EVR) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. Our calculations also showed that EVR 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). There were 29 hedge funds in our database with EVR positions at the end of the first quarter.
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.
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. Keeping this in mind let’s check out the recent hedge fund action regarding Evercore Inc. (NYSE:EVR).
How are hedge funds trading Evercore Inc. (NYSE:EVR)?
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EVR over the last 20 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, GLG Partners held the most valuable stake in Evercore Inc. (NYSE:EVR), which was worth $27.1 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $22.4 million worth of shares. AQR Capital Management, Basswood Capital, and Kettle Hill 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 Kettle Hill Capital Management allocated the biggest weight to Evercore Inc. (NYSE:EVR), around 3.56% of its 13F portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, earmarking 3.28 percent of its 13F equity portfolio to EVR.
Since Evercore Inc. (NYSE:EVR) has experienced bearish sentiment from the smart money, it’s easy to see that there exists a select few money managers who were dropping their positions entirely last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dropped the largest investment of all the hedgies tracked by Insider Monkey, comprising about $12.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $8.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Evercore Inc. (NYSE:EVR). These stocks are Arco Platform Limited (NASDAQ:ARCE), ViaSat, Inc. (NASDAQ:VSAT), Kennametal Inc. (NYSE:KMT), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), Fiverr International Ltd. (NYSE:FVRR), Sunrun Inc (NASDAQ:RUN), and DCP Midstream LP (NYSE:DCP). This group of stocks’ market caps are closest to EVR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $393 million. That figure was $177 million in EVR’s case. Arco Platform Limited (NASDAQ:ARCE) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 2 bullish hedge fund positions. Evercore Inc. (NYSE:EVR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EVR is 73.7. 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 EVR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EVR were disappointed as the stock returned 4.7% 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.