We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Everbridge, Inc. (NASDAQ:EVBG).
Is EVBG a good stock to buy? Everbridge, Inc. (NASDAQ:EVBG) investors should be aware of a decrease in enthusiasm from smart money recently. Everbridge, Inc. (NASDAQ:EVBG) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that EVBG 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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 stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we’re going to check out the latest hedge fund action surrounding Everbridge, Inc. (NASDAQ:EVBG).
Do Hedge Funds Think EVBG Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EVBG over the last 21 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in Everbridge, Inc. (NASDAQ:EVBG), which was worth $463.3 million at the end of the third quarter. On the second spot was Sylebra Capital Management which amassed $198.8 million worth of shares. Polar Capital, Citadel Investment Group, and Motley Fool Asset Management 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 Cota Capital allocated the biggest weight to Everbridge, Inc. (NASDAQ:EVBG), around 6.79% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 6.11 percent of its 13F equity portfolio to EVBG.
Because Everbridge, Inc. (NASDAQ:EVBG) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their positions entirely in the third quarter. Intriguingly, Principal Global Investors’s Columbus Circle Investors cut the biggest position of all the hedgies watched by Insider Monkey, worth close to $19 million in stock. James Crichton’s fund, Hitchwood Capital Management, also cut its stock, about $17.3 million worth. These moves are important to note, as total hedge fund interest fell by 13 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Everbridge, Inc. (NASDAQ:EVBG) but similarly valued. We will take a look at Advanced Drainage Systems Inc. (NYSE:WMS), Mercury Systems Inc (NASDAQ:MRCY), Tapestry, Inc. (NYSE:TPR), Navistar International Corp (NYSE:NAV), Littelfuse, Inc. (NASDAQ:LFUS), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and Starwood Property Trust, Inc. (NYSE:STWD). This group of stocks’ market values match EVBG’s market value.
|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 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $712 million. That figure was $980 million in EVBG’s case. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 17 bullish hedge fund positions. Everbridge, Inc. (NASDAQ:EVBG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EVBG is 37.9. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on EVBG as the stock returned 18.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.