Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Bottomline Technologies (NASDAQ:EPAY) to find out whether there were any major changes in hedge funds’ views.
Bottomline Technologies (NASDAQ:EPAY) was in 19 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. EPAY investors should be aware of an increase in hedge fund interest of late. There were 18 hedge funds in our database with EPAY positions at the end of the fourth quarter. Our calculations also showed that EPAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the recent hedge fund action encompassing Bottomline Technologies (NASDAQ:EPAY).
Do Hedge Funds Think EPAY Is A Good Stock To Buy Now?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in EPAY a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Bottomline Technologies (NASDAQ:EPAY) was held by MIG Capital, which reported holding $43.2 million worth of stock at the end of December. It was followed by Clearline Capital with a $8.5 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and Fisher Asset Management. In terms of the portfolio weights assigned to each position MIG Capital allocated the biggest weight to Bottomline Technologies (NASDAQ:EPAY), around 4.26% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, dishing out 1.1 percent of its 13F equity portfolio to EPAY.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, initiated the most outsized position in Bottomline Technologies (NASDAQ:EPAY). Engineers Gate Manager had $0.7 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new EPAY investors: Peter Algert’s Algert Global and Roger Ibbotson’s Zebra Capital Management.
Let’s go over hedge fund activity in other stocks similar to Bottomline Technologies (NASDAQ:EPAY). We will take a look at USANA Health Sciences, Inc. (NYSE:USNA), Century Communities, Inc (NYSE:CCS), The RealReal, Inc. (NASDAQ:REAL), Chesapeake Utilities Corporation (NYSE:CPK), EHang Holdings Limited (NASDAQ:EH), Liberty Oilfield Services Inc. (NYSE:LBRT), and bluebird bio Inc (NASDAQ:BLUE). All of these stocks’ market caps are similar to EPAY’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 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $98 million in EPAY’s case. bluebird bio Inc (NASDAQ:BLUE) is the most popular stock in this table. On the other hand EHang Holdings Limited (NASDAQ:EH) is the least popular one with only 4 bullish hedge fund positions. Bottomline Technologies (NASDAQ:EPAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPAY is 64.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately EPAY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EPAY were disappointed as the stock returned -15.9% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.