Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Global Eagle Entertainment Inc. (NASDAQ:ENT) changed recently.
Hedge fund interest in Global Eagle Entertainment Inc. (NASDAQ:ENT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Volt Information Sciences, Inc. (NYSE:VOLT), Mastech Digital, Inc. (NYSE:MHH), and Champions Oncology, Inc. (NASDAQ:CSBR) to gather more data points. Our calculations also showed that ENT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the key hedge fund action encompassing Global Eagle Entertainment Inc. (NASDAQ:ENT).
How have hedgies been trading Global Eagle Entertainment Inc. (NASDAQ:ENT)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in ENT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Global Eagle Entertainment Inc. (NASDAQ:ENT) was held by Nantahala Capital Management, which reported holding $20.8 million worth of stock at the end of September. It was followed by Emancipation Capital with a $1.2 million position. Other investors bullish on the company included Sound Point Capital, Tenzing Global Investors, and Royce & Associates. In terms of the portfolio weights assigned to each position Emancipation Capital allocated the biggest weight to Global Eagle Entertainment Inc. (NASDAQ:ENT), around 4.12% of its 13F portfolio. Sound Point Capital is also relatively very bullish on the stock, designating 0.8 percent of its 13F equity portfolio to ENT.
Because Global Eagle Entertainment Inc. (NASDAQ:ENT) has faced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few funds who were dropping their full holdings in the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group cut the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $0.1 million in stock, and David E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Global Eagle Entertainment Inc. (NASDAQ:ENT). These stocks are Volt Information Sciences, Inc. (NYSE:VOLT), Mastech Digital, Inc. (NYSE:MHH), Champions Oncology, Inc. (NASDAQ:CSBR), and Emmis Communications Corporation (NASDAQ:EMMS). All of these stocks’ market caps resemble ENT’s market cap.
|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 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $23 million in ENT’s case. Volt Information Sciences, Inc. (NYSE:VOLT) is the most popular stock in this table. On the other hand Mastech Digital, Inc. (NYSE:MHH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Global Eagle Entertainment Inc. (NASDAQ:ENT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ENT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ENT were disappointed as the stock returned -33.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.