Did The Smart Money Play Everi Holdings Inc (EVRI) Correctly?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Everi Holdings Inc (NYSE:EVRI) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Everi Holdings Inc (NYSE:EVRI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 31 hedge funds’ portfolios at the end of September. Our calculations also showed that EVRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare EVRI to other stocks including Hello Group Inc. (NASDAQ:MOMO), Cimpress plc (NASDAQ:CMPR), and Cavco Industries, Inc. (NASDAQ:CVCO) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to analyze the key hedge fund action regarding Everi Holdings Inc (NYSE:EVRI).

John Overdeck of Two Sigma Advisors

Do Hedge Funds Think EVRI Is A Good Stock To Buy Now?

At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in EVRI 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.

The largest stake in Everi Holdings Inc (NYSE:EVRI) was held by Driehaus Capital, which reported holding $46.7 million worth of stock at the end of September. It was followed by Cowbird Capital with a $29.8 million position. Other investors bullish on the company included Two Sigma Advisors, Private Capital Management, and DG Capital Management. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to Everi Holdings Inc (NYSE:EVRI), around 10.22% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, earmarking 5.02 percent of its 13F equity portfolio to EVRI.

Since Everi Holdings Inc (NYSE:EVRI) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who sold off their positions entirely in the third quarter. It’s worth mentioning that Jeffrey Jacobowitz’s Simcoe Capital Management dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling about $22.2 million in call options. Seth Wunder’s fund, Black-and-White Capital, also said goodbye to its call options, about $9.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Everi Holdings Inc (NYSE:EVRI). These stocks are Hello Group Inc. (NASDAQ:MOMO), Cimpress plc (NASDAQ:CMPR), Cavco Industries, Inc. (NASDAQ:CVCO), First Midwest Bancorp Inc (NASDAQ:FMBI), C4 Therapeutics, Inc. (NASDAQ:CCCC), Nuvation Bio Inc. (NYSE:NUVB), and Sandy Spring Bancorp Inc. (NASDAQ:SASR). This group of stocks’ market valuations are similar to EVRI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $301 million in EVRI’s case. Nuvation Bio Inc. (NYSE:NUVB) is the most popular stock in this table. On the other hand Sandy Spring Bancorp Inc. (NASDAQ:SASR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Everi Holdings Inc (NYSE:EVRI) is more popular among hedge funds. Our overall hedge fund sentiment score for EVRI is 85. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, EVRI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EVRI were disappointed as the stock returned -18.2% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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