At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Entravision Communications Corporation (NYSE:EVC) makes for a good investment right now.
Is EVC a good stock to buy now? The best stock pickers were cutting their exposure. The number of bullish hedge fund positions went down by 1 lately. Entravision Communications Corporation (NYSE:EVC) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that EVC 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 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 take a gander at the new hedge fund action regarding Entravision Communications Corporation (NYSE:EVC).
Do Hedge Funds Think EVC Is A Good Stock To Buy Now?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EVC over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co has the biggest position in Entravision Communications Corporation (NYSE:EVC), worth close to $9 million, corresponding to 1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $3.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions include D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Angelo Gordon & Co allocated the biggest weight to Entravision Communications Corporation (NYSE:EVC), around 1.01% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to EVC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Invenomic Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified EVC as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Entravision Communications Corporation (NYSE:EVC) but similarly valued. We will take a look at StoneCastle Financial Corp (NASDAQ:BANX), DarioHealth Corp. (NASDAQ:DRIO), Spark Networks SE (NYSE:LOV), Graham Corporation (NYSE:GHM), Resonant Inc. (NASDAQ:RESN), The Community Financial Corp (NASDAQ:TCFC), and PlayAGS, Inc. (NYSE:AGS). All of these stocks’ market caps resemble EVC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $16 million in EVC’s case. PlayAGS, Inc. (NYSE:AGS) is the most popular stock in this table. On the other hand StoneCastle Financial Corp (NASDAQ:BANX) is the least popular one with only 1 bullish hedge fund positions. Entravision Communications Corporation (NYSE:EVC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EVC is 54.8. 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 EVC as the stock returned 105.9% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.