Is Enstar Group Limited (ESGR) A Good Stock To Buy?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Enstar Group Limited (NASDAQ:ESGR) based on that data.

Enstar Group Limited (NASDAQ:ESGR) investors should be aware of a decrease in support from the world’s most elite money managers lately. ESGR was in 10 hedge funds’ portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with ESGR positions at the end of the previous quarter. Our calculations also showed that ESGR isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are more than 8000 funds trading at the moment, Our researchers hone in on the bigwigs of this club, around 750 funds. It is estimated that this group of investors manage the lion’s share of the hedge fund industry’s total capital, and by following their matchless equity investments, Insider Monkey has determined a number of investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Lei Zhang Hillhouse Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action encompassing Enstar Group Limited (NASDAQ:ESGR).

What have hedge funds been doing with Enstar Group Limited (NASDAQ:ESGR)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ESGR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

No of Hedge Funds with ESGR Positions

More specifically, Hillhouse Capital Management was the largest shareholder of Enstar Group Limited (NASDAQ:ESGR), with a stake worth $209.9 million reported as of the end of March. Trailing Hillhouse Capital Management was Diamond Hill Capital, which amassed a stake valued at $48.3 million. Akre Capital Management, Renaissance Technologies, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Enstar Group Limited (NASDAQ:ESGR) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital sold off the largest position of the 750 funds followed by Insider Monkey, totaling about $0.9 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Enstar Group Limited (NASDAQ:ESGR). These stocks are Globant SA (NYSE:GLOB), Bank OZK (NASDAQ:OZK), Eldorado Resorts Inc (NASDAQ:ERI), and AutoNation, Inc. (NYSE:AN). All of these stocks’ market caps are similar to ESGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLOB 14 63286 -6
OZK 21 285631 1
ERI 37 1022483 6
AN 22 402713 1
Average 23.5 443528 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $444 million. That figure was $302 million in ESGR’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Enstar Group Limited (NASDAQ:ESGR) is even less popular than GLOB. Hedge funds clearly dropped the ball on ESGR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ESGR as the stock returned 9% during the third quarter and outperformed the market by an even larger margin.

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