Euronet Worldwide, Inc. (EEFT): Should You Be Worried About Falling Smart Money Ownership?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Euronet Worldwide, Inc. (NASDAQ:EEFT).

Euronet Worldwide, Inc. (NASDAQ:EEFT) was in 22 hedge funds’ portfolios at the end of the third quarter of 2016. EEFT shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 28 hedge funds in our database with EEFT positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as LATAM Airlines Group SA (ADR) (NYSE:LFL), Alere Inc (NYSE:ALR), and Ritchie Bros. Auctioneers (USA) (NYSE:RBA) to gather more data points.

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.

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What have hedge funds been doing with Euronet Worldwide, Inc. (NASDAQ:EEFT)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 21% fall from the second quarter of 2016, as smart money ownership of EEFT remains volatile. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Euronet Worldwide, Inc. (NASDAQ:EEFT). Renaissance Technologies has a $62.3 million position in the stock. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $25.8 million position. Some other professional money managers that are bullish contain Cliff Asness’ AQR Capital Management, George McCabe’s Portolan Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Since Euronet Worldwide, Inc. (NASDAQ:EEFT) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that George Hall’s Clinton Group sold off the largest investment of all the hedgies followed by Insider Monkey, totaling close to $11.3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $4.1 million worth of shares. These moves are interesting, as total hedge fund interest was cut by 6 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Euronet Worldwide, Inc. (NASDAQ:EEFT). These stocks are LATAM Airlines Group SA (ADR) (NYSE:LFL), Alere Inc (NYSE:ALR), Ritchie Bros. Auctioneers (USA) (NYSE:RBA), and MAXIMUS, Inc. (NYSE:MMS). This group of stocks’ market valuations are closest to EEFT’s market valuation.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $233 million in EEFT’s case. Alere Inc (NYSE:ALR) is the most popular stock in this table. On the other hand LATAM Airlines Group SA (ADR) (NYSE:LFL) is the least popular one with only 8 bullish hedge fund positions. Euronet Worldwide, Inc. (NASDAQ:EEFT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ALR might be a better candidate to consider for a long position.

Disclosure: None