Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Bottomline Technologies (de), Inc. (NASDAQ:EPAY) undervalued? The smart money is in an optimistic mood. The number of bullish hedge fund bets moved up by 4 in recent months. Our calculations also showed that EPAY 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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a gander at the fresh hedge fund action regarding Bottomline Technologies (de), Inc. (NASDAQ:EPAY).
How have hedgies been trading Bottomline Technologies (de), Inc. (NASDAQ:EPAY)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EPAY over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Bottomline Technologies (de), Inc. (NASDAQ:EPAY), worth close to $34 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $30.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions encompass Spencer M. Waxman’s Shannon River Fund Management, Israel Englander’s Millennium Management and Sander Gerber’s Hudson Bay Capital Management.
Consequently, some big names have jumped into Bottomline Technologies (de), Inc. (NASDAQ:EPAY) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most valuable call position in Bottomline Technologies (de), Inc. (NASDAQ:EPAY). PEAK6 Capital Management had $3.4 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Bruce Kovner’s Caxton Associates LP, Mike Vranos’s Ellington, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bottomline Technologies (de), Inc. (NASDAQ:EPAY) but similarly valued. We will take a look at Corporate Office Properties Trust (NYSE:OFC), Silgan Holdings Inc. (NASDAQ:SLGN), Physicians Realty Trust (NYSE:DOC), and SkyWest, Inc. (NASDAQ:SKYW). This group of stocks’ market values match EPAY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OFC | 10 | 90712 | -5 |
| SLGN | 12 | 100655 | -1 |
| DOC | 9 | 72284 | -1 |
| SKYW | 14 | 157798 | 2 |
| Average | 11.25 | 105362 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $131 million in EPAY’s case. SkyWest, Inc. (NASDAQ:SKYW) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Bottomline Technologies (de), Inc. (NASDAQ:EPAY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
