Encore Capital Group, Inc. (ECPG): Are Hedge Funds Right About This Stock?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Encore Capital Group, Inc. (NASDAQ:ECPG).

Encore Capital Group, Inc. (NASDAQ:ECPG) investors should be aware of an increase in enthusiasm from smart money of late. Encore Capital Group, Inc. (NASDAQ:ECPG) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 20. Our calculations also showed that ECPG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most stock holders, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, We choose to focus on the leaders of this club, around 850 funds. Most estimates calculate that this group of people preside over bulk of all hedge funds’ total asset base, and by tailing their best equity investments, Insider Monkey has revealed a number of investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

Now we’re going to take a gander at the fresh hedge fund action surrounding Encore Capital Group, Inc. (NASDAQ:ECPG).

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

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in ECPG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, BloombergSen held the most valuable stake in Encore Capital Group, Inc. (NASDAQ:ECPG), which was worth $40.2 million at the end of the second quarter. On the second spot was D E Shaw which amassed $14.1 million worth of shares. Portolan Capital Management, Arrowstreet Capital, and Citadel Investment Group 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 Second Curve Capital allocated the biggest weight to Encore Capital Group, Inc. (NASDAQ:ECPG), around 3.71% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, earmarking 2.11 percent of its 13F equity portfolio to ECPG.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Granite Point Capital, managed by Warren Lammert, created the largest position in Encore Capital Group, Inc. (NASDAQ:ECPG). Granite Point Capital had $2.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Allon Hellmann’s Full18 Capital and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Encore Capital Group, Inc. (NASDAQ:ECPG) but similarly valued. These stocks are Brookdale Senior Living, Inc. (NYSE:BKD), Mission Produce, Inc. (NASDAQ:AVO), Codexis, Inc. (NASDAQ:CDXS), Inogen Inc (NASDAQ:INGN), Ladder Capital Corp (NYSE:LADR), Golar LNG Limited (NASDAQ:GLNG), and Griffon Corporation (NYSE:GFF). This group of stocks’ market values are similar to ECPG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $97 million in ECPG’s case. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular stock in this table. On the other hand Mission Produce, Inc. (NASDAQ:AVO) is the least popular one with only 1 bullish hedge fund positions. Encore Capital Group, Inc. (NASDAQ:ECPG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ECPG is 63.5. 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. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on ECPG as the stock returned 8.6% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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