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Here’s What Hedge Funds Think About Eros International plc (EROS)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Eros International plc (NYSE:EROS) from the perspective of those elite funds.

Is Eros International plc (NYSE:EROS) a good stock to buy now? The best stock pickers are turning bullish. The number of bullish hedge fund bets advanced by 1 in recent months. Our calculations also showed that EROS isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

BlueMountain Capital Management's Returns, AUM and Holdings

We’re going to check out the key hedge fund action regarding Eros International plc (NYSE:EROS).

What have hedge funds been doing with Eros International plc (NYSE:EROS)?

Heading into the first quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EROS over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

EROS_may2019

More specifically, Millennium Management was the largest shareholder of Eros International plc (NYSE:EROS), with a stake worth $6.8 million reported as of the end of December. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $0.9 million. D E Shaw and Blue Mountain Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, some big names have been driving this bullishness. D E Shaw, managed by D. E. Shaw, assembled the largest position in Eros International plc (NYSE:EROS). D E Shaw had $0.2 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also initiated a $0 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to Eros International plc (NYSE:EROS). We will take a look at ConnectOne Bancorp Inc (NASDAQ:CNOB), Live Oak Bancshares Inc (NASDAQ:LOB), US Concrete Inc (NASDAQ:USCR), and Unisys Corporation (NYSE:UIS). This group of stocks’ market caps resemble EROS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNOB 12 44013 -3
LOB 11 29993 3
USCR 18 58528 -1
UIS 17 96581 3
Average 14.5 57279 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $8 million in EROS’s case. US Concrete Inc (NASDAQ:USCR) is the most popular stock in this table. On the other hand Live Oak Bancshares Inc (NASDAQ:LOB) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Eros International plc (NYSE:EROS) is even less popular than LOB. Hedge funds dodged a bullet by taking a bearish stance towards EROS. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EROS wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); EROS investors were disappointed as the stock returned -3.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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