Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a ‘winner’ within among them. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and unlimited resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Ebix Inc (NASDAQ:EBIX) going to take off soon? Hedge funds are growing less bullish. The number of bullish hedge fund positions was cut by two recently. EBIX was in 12 hedge funds’ portfolios at the end of the third quarter of 2015. There were 14 hedge funds in our database with EBIX positions at the end of the previous quarter. At the end of this article we will also compare EBIX to other stocks including EnPro Industries, Inc. (NYSE:NPO), Nuveen Premium Income Municipal Fund Inc (NYSE:NPI), and Federal Signal Corporation (NYSE:FSS) to get a better sense of its popularity.
If you’d ask most stock holders, hedge funds are viewed as slow, outdated financial vehicles of years past. While there are greater than 8,000 funds trading at present, experts at Insider Monkey, a website specializing in hedge funds, choose to focus on the top tier of this group, around 700 funds. Most estimates calculate that this group of people shepherd the bulk of the smart money’s total asset base, and by following their inimitable investments, Insider Monkey has determined numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in its back tests.
With all of this in mind, let’s analyze the latest action surrounding Ebix Inc (NASDAQ:EBIX).
How are hedge funds trading Ebix Inc (NASDAQ:EBIX)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long in this stock, down by 14% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly.
Of the funds tracked by Insider Monkey, P2 Capital Partners, managed by Claus Moller, holds the number one position in Ebix Inc (NASDAQ:EBIX). P2 Capital Partners has a $42.5 million position in the stock, comprising 8.2% of its 13F portfolio. On P2 Capital Partners’ heels is D E Shaw, founded by David E. Shaw, which holds a $9.5 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Chuck Royce’s Royce & Associates, Robert B. Gillam’s McKinley Capital Management, and Michael M. Rothenberg and David Sackler’s Moab Capital Partners.
Seeing as Ebix Inc (NASDAQ:EBIX) has faced a declination in interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds who sold off their full holdings heading into Q4. At the top of the heap, Israel Englander’s Millennium Management cut the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $0.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by two funds heading into Q4.
Let’s also take a look at hedge fund activity in other stocks similar to Ebix Inc (NASDAQ:EBIX). These stocks are EnPro Industries, Inc. (NYSE:NPO), Nuveen Premium Income Municipal Fund Inc (NYSE:NPI), Federal Signal Corporation (NYSE:FSS), and Teladoc Inc (NYSE:TDOC). This group of stocks’ market caps match EBIX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $115 million compared to $69 million invested in Ebix. EnPro Industries, Inc. (NYSE:NPO) is the most popular stock in this table. On the other hand Nuveen Premium Income Municipal Fund Inc (NYSE:NPI) is the least popular one with only four bullish hedge fund positions. Ebix Inc (NASDAQ:EBIX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NPO might be a better candidate to consider a long position in.