We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards e.l.f. Beauty Inc (NYSE:ELF) , and what that likely means for the prospects of the company and its stock.
At the end of September, e.l.f. Beauty Inc (NYSE:ELF) was included in the 13F portfolios of 24 funds tracked by Insider Monkey, which is a pretty decent level of popularity for a stock that went public on September 22. However, to get a better sense of its popularity, at the end of this article we will also compare ELF to other stocks including Glaukos Corp (NYSE:GKOS), Knowles Corp (NYSE:KN), and Sonic Corporation (NASDAQ:SONC).
Follow E.l.f. Beauty Inc. (NYSE:ELF)
Follow E.l.f. Beauty Inc. (NYSE:ELF)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Africa Studio/Shutterstock.com
With all of this in mind, we’re going to take a peek at the new action encompassing e.l.f. Beauty Inc (NYSE:ELF).
Hedge fund activity in e.l.f. Beauty Inc (NYSE:ELF)
As stated earlier, as the stock went public in the third quarter, 24 funds tracked by Insider Monkey amassed shares of ELF at the end of September. So, let’s check out which hedge funds were among the top holders of the stock.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, led by Phill Gross and Robert Atchinson, holds the number one position in e.l.f. Beauty Inc (NYSE:ELF). Adage Capital Management has a $26.9 million position in the stock, comprising 0.1% of its 13F portfolio. On Adage Capital Management’s heels is DSAM Partners, led by Guy Shahar, holding a $4.1 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other peers with similar optimism include Andrew Sandler’s Sandler Capital Management, Principal Global Investors’s Columbus Circle Investors and Anand Parekh’s Alyeska Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
On the following page, we will compare e.l.f. Beauty to a number of other similarly-valued stocks.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as e.l.f. Beauty Inc (NYSE:ELF) but similarly valued. We will take a look at Glaukos Corp (NYSE:GKOS), Knowles Corp (NYSE:KN), Sonic Corporation (NASDAQ:SONC), and Evertec Inc (NYSE:EVTC). This group of stocks’ market values are close to ELF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GKOS | 19 | 175123 | 3 |
| KN | 11 | 18331 | 1 |
| SONC | 22 | 325006 | 4 |
| EVTC | 19 | 256706 | 3 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $62 million in ELF’s case. Sonic Corporation (NASDAQ:SONC) is the most popular stock in this table with 22 funds holding shares. On the other hand Knowles Corp (NYSE:KN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks e.l.f. Beauty Inc (NYSE:ELF) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: none
