While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Enterprise Financial Services Corp (NASDAQ:EFSC).
Is EFSC a good stock to buy now? Hedge fund interest in Enterprise Financial Services Corp (NASDAQ:EFSC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EFSC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare EFSC to other stocks including Partner Communications Company Ltd (NASDAQ:PTNR), ChipMOS Technologies Inc (NASDAQ:IMOS), and CTS Corporation (NYSE:CTS) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of metrics stock market investors can use to value stocks. Some of the most useful metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outclass the broader indices by a very impressive margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s review the fresh hedge fund action regarding Enterprise Financial Services Corp (NASDAQ:EFSC).
Do Hedge Funds Think EFSC Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EFSC over the last 21 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Enterprise Financial Services Corp (NASDAQ:EFSC), which was worth $8.2 million at the end of the third quarter. On the second spot was Elizabeth Park Capital Management which amassed $4.8 million worth of shares. EJF Capital, Arrowstreet Capital, and Polar Capital 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 Elizabeth Park Capital Management allocated the biggest weight to Enterprise Financial Services Corp (NASDAQ:EFSC), around 3.11% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 0.22 percent of its 13F equity portfolio to EFSC.
Because Enterprise Financial Services Corp (NASDAQ:EFSC) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers who sold off their positions entirely in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest position of all the hedgies followed by Insider Monkey, worth close to $0.4 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dropped about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Enterprise Financial Services Corp (NASDAQ:EFSC). These stocks are Partner Communications Company Ltd (NASDAQ:PTNR), ChipMOS Technologies Inc (NASDAQ:IMOS), CTS Corporation (NYSE:CTS), Tactile Systems Technology, Inc. (NASDAQ:TCMD), Zumiez Inc. (NASDAQ:ZUMZ), H&E Equipment Services, Inc. (NASDAQ:HEES), and Kforce Inc. (NASDAQ:KFRC). All of these stocks’ market caps are closest to EFSC’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 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $27 million in EFSC’s case. Zumiez Inc. (NASDAQ:ZUMZ) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 1 bullish hedge fund positions. Enterprise Financial Services Corp (NASDAQ:EFSC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EFSC is 67.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on EFSC as the stock returned 28.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.