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Were Hedge Funds Right About Piling Into The Ensign Group, Inc. (ENSG)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Ensign Group, Inc. (NASDAQ:ENSG) and determine whether hedge funds skillfully traded this stock.

Is The Ensign Group, Inc. (NASDAQ:ENSG) a buy, sell, or hold? Hedge funds were buying. The number of bullish hedge fund bets inched up by 3 recently. Our calculations also showed that ENSG 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). ENSG was in 18 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with ENSG positions at the end of the previous quarter.

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.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a glance at the new hedge fund action surrounding The Ensign Group, Inc. (NASDAQ:ENSG).

How have hedgies been trading The Ensign Group, Inc. (NASDAQ:ENSG)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in ENSG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ENSG A Good Stock To Buy?

Among these funds, Polar Capital held the most valuable stake in The Ensign Group, Inc. (NASDAQ:ENSG), which was worth $20.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $16.4 million worth of shares. Royce & Associates, Eversept Partners, 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 Eversept Partners allocated the biggest weight to The Ensign Group, Inc. (NASDAQ:ENSG), around 3.4% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to ENSG.

Consequently, key money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, assembled the most outsized position in The Ensign Group, Inc. (NASDAQ:ENSG). D E Shaw had $2.1 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Hoon Kim’s Quantinno Capital, Frederick DiSanto’s Ancora Advisors, and Qing Li’s Sciencast Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Ensign Group, Inc. (NASDAQ:ENSG) but similarly valued. These stocks are Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Home Bancshares Inc (NASDAQ:HOMB), and National Beverage Corp. (NASDAQ:FIZZ). This group of stocks’ market caps match ENSG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APLS 30 455911 -1
CBRL 23 101131 -1
HOMB 20 15614 8
FIZZ 20 202468 -1
Average 23.25 193781 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $89 million in ENSG’s case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand Home Bancshares Inc (NASDAQ:HOMB) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks The Ensign Group, Inc. (NASDAQ:ENSG) is even less popular than HOMB. Hedge funds dodged a bullet by taking a bearish stance towards ENSG. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately ENSG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ENSG investors were disappointed as the stock returned 23.4% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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