Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Eagle Bulk Shipping Inc. (NASDAQ:EGLE).
Eagle Bulk Shipping Inc. (NASDAQ:EGLE) shareholders have witnessed an increase in hedge fund sentiment lately. Our calculations also showed that EGLE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Howard Marks of Oaktree Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action surrounding Eagle Bulk Shipping Inc. (NASDAQ:EGLE).
How have hedgies been trading Eagle Bulk Shipping Inc. (NASDAQ:EGLE)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EGLE over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Oaktree Capital Management was the largest shareholder of Eagle Bulk Shipping Inc. (NASDAQ:EGLE), with a stake worth $129.3 million reported as of the end of September. Trailing Oaktree Capital Management was GoldenTree Asset Management, which amassed a stake valued at $61.6 million. Royce & Associates, Renaissance Technologies, and Millennium 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 GoldenTree Asset Management allocated the biggest weight to Eagle Bulk Shipping Inc. (NASDAQ:EGLE), around 8.92% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 2.54 percent of its 13F equity portfolio to EGLE.
As one would reasonably expect, key hedge funds were breaking ground themselves. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, initiated the most valuable call position in Eagle Bulk Shipping Inc. (NASDAQ:EGLE). Springbok Capital had $0.4 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.1 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Eagle Bulk Shipping Inc. (NASDAQ:EGLE) but similarly valued. These stocks are Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), Motorcar Parts of America, Inc. (NASDAQ:MPAA), Sientra Inc (NASDAQ:SIEN), and Howard Bancorp Inc (NASDAQ:HBMD). This group of stocks’ market valuations are similar to EGLE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LXRX | 13 | 9261 | 2 |
| MPAA | 8 | 60972 | -5 |
| SIEN | 16 | 103194 | -3 |
| HBMD | 3 | 16817 | 1 |
| Average | 10 | 47561 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $207 million in EGLE’s case. Sientra Inc (NASDAQ:SIEN) is the most popular stock in this table. On the other hand Howard Bancorp Inc (NASDAQ:HBMD) is the least popular one with only 3 bullish hedge fund positions. Eagle Bulk Shipping Inc. (NASDAQ:EGLE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on EGLE, though not to the same extent, as the stock returned 8.9% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
