In this article you are going to find out whether hedge funds think Everi Holdings Inc (NYSE:EVRI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Everi Holdings Inc (NYSE:EVRI) has experienced a decrease in hedge fund interest lately. Our calculations also showed that EVRI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the latest hedge fund action surrounding Everi Holdings Inc (NYSE:EVRI).
How have hedgies been trading Everi Holdings Inc (NYSE:EVRI)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EVRI over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Everi Holdings Inc (NYSE:EVRI) was held by Indaba Capital Management, which reported holding $14.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $9.7 million position. Other investors bullish on the company included Private Capital Management, Millennium Management, and DG Capital Management. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Everi Holdings Inc (NYSE:EVRI), around 7.8% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, setting aside 6.89 percent of its 13F equity portfolio to EVRI.
Because Everi Holdings Inc (NYSE:EVRI) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there were a few fund managers that elected to cut their full holdings in the first quarter. Intriguingly, Matthew Drapkin and Steven R. Becker’s Becker Drapkin Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $11.9 million in stock, and Michael O’Keefe’s 12th Street Asset Management was right behind this move, as the fund said goodbye to about $4.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Everi Holdings Inc (NYSE:EVRI) but similarly valued. We will take a look at XPEL Inc. (NASDAQ:XPEL), Chatham Lodging Trust (NYSE:CLDT), Napco Security Technologies Inc (NASDAQ:NSSC), and Crescent Capital BDC, Inc. (NASDAQ:CCAP). This group of stocks’ market caps are closest to EVRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XPEL | 9 | 21499 | 1 |
| CLDT | 8 | 19702 | -2 |
| NSSC | 5 | 2912 | -4 |
| CCAP | 5 | 38910 | 5 |
| Average | 6.75 | 20756 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $59 million in EVRI’s case. XPEL Inc. (NASDAQ:XPEL) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Everi Holdings Inc (NYSE:EVRI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on EVRI as the stock returned 114.5% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Everi Holdings Inc. (NYSE:EVRI)
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Disclosure: None. This article was originally published at Insider Monkey.
