It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Engility Holdings, Inc. (NYSE:EGL).
Engility Holdings, Inc. (NYSE:EGL) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with EGL positions at the end of the last quarter. At the end of this article we will also compare EGL to other stocks including Insight Enterprises, Inc. (NASDAQ:NSIT), Nuveen Credit Strategies Income Fund (NYSE:JQC), and AK Steel Holding Corporation (NYSE:AKS) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading Engility Holdings, Inc. (NYSE:EGL)?
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EGL over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital holds the largest position in Engility Holdings, Inc. (NYSE:EGL). Arrowstreet Capital has a $8.5 million position in the stock. Coming in second is Renaissance Technologies, one of the biggest hedge funds in the world, holding a $6.7 million position. Remaining members of the smart money with similar optimism include Cliff Asness’ AQR Capital Management, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since Engility Holdings, Inc. (NYSE:EGL) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few funds who sold off their positions entirely in the third quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the biggest stake of the 700 funds studied by Insider Monkey, worth close to $0.9 million in stock. Neil Chriss’ fund, Hutchin Hill Capital, also said goodbye to its stock, about $0.6 million worth.
Let’s now take a look at hedge fund activity in other stocks similar to Engility Holdings, Inc. (NYSE:EGL). We will take a look at Insight Enterprises, Inc. (NASDAQ:NSIT), Nuveen Credit Strategies Income Fund (NYSE:JQC), AK Steel Holding Corporation (NYSE:AKS), and Ferro Corporation (NYSE:FOE). All of these stocks’ market caps resemble EGL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $34 million in EGL’s case. AK Steel Holding Corporation (NYSE:AKS) is the most popular stock in this table. On the other hand Nuveen Credit Strategies Income Fund (NYSE:JQC) is the least popular one with only 7 bullish hedge fund positions. Engility Holdings, Inc. (NYSE:EGL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AKS might be a better candidate to consider taking a long position in.