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Were Hedge Funds Right About Piling Into Elevate Credit, Inc. (ELVT)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Elevate Credit, Inc. (NYSE:ELVT) and determine whether the smart money was really smart about this stock.

Is Elevate Credit, Inc. (NYSE:ELVT) a bargain? Hedge funds were becoming hopeful. The number of bullish hedge fund positions went up by 1 recently. Our calculations also showed that ELVT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the new hedge fund action regarding Elevate Credit, Inc. (NYSE:ELVT).

What have hedge funds been doing with Elevate Credit, Inc. (NYSE:ELVT)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the fourth quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in ELVT 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.

Among these funds, Renaissance Technologies held the most valuable stake in Elevate Credit, Inc. (NYSE:ELVT), which was worth $1.6 million at the end of the third quarter. On the second spot was Prescott Group Capital Management which amassed $0.9 million worth of shares. Arrowstreet Capital, D E Shaw, and Winton Capital 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 Prescott Group Capital Management allocated the biggest weight to Elevate Credit, Inc. (NYSE:ELVT), around 0.47% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to ELVT.

Now, some big names have jumped into Elevate Credit, Inc. (NYSE:ELVT) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Elevate Credit, Inc. (NYSE:ELVT). Arrowstreet Capital had $0.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Elevate Credit, Inc. (NYSE:ELVT) but similarly valued. We will take a look at Performant Financial Corp (NASDAQ:PFMT), Milestone Pharmaceuticals Inc. (NASDAQ:MIST), Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL), and Smart Sand, Inc. (NASDAQ:SND). This group of stocks’ market values resemble ELVT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFMT 3 12188 -1
MIST 5 958 -2
HFBL 1 637 0
SND 4 1207 -5
Average 3.25 3748 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $3 million in ELVT’s case. Milestone Pharmaceuticals Inc. (NASDAQ:MIST) is the most popular stock in this table. On the other hand Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Elevate Credit, Inc. (NYSE:ELVT) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on ELVT as the stock returned 42.3% in Q2 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.

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Disclosure: None. This article was originally published at Insider Monkey.