Hedge Funds Are Buying EngageSmart, LLC (ESMT)

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 900 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 EngageSmart, LLC (NYSE:ESMT).

Is EngageSmart, LLC (NYSE:ESMT) a buy, sell, or hold? Money managers were turning bullish. The number of long hedge fund positions advanced by 28 recently. EngageSmart, LLC (NYSE:ESMT) was in 28 hedge funds’ portfolios at the end of September. Our calculations also showed that ESMT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let’s take a look at the recent hedge fund action surrounding EngageSmart, LLC (NYSE:ESMT).

Ken Griffin of Citadel Investment Group

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

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28 from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ESMT over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Holocene Advisors was the largest shareholder of EngageSmart, LLC (NYSE:ESMT), with a stake worth $40.7 million reported as of the end of September. Trailing Holocene Advisors was Millennium Management, which amassed a stake valued at $35.7 million. Citadel Investment Group, Schonfeld Strategic Advisors, and LMR Partners 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 Pinz Capital allocated the biggest weight to EngageSmart, LLC (NYSE:ESMT), around 0.71% of its 13F portfolio. Hitchwood Capital Management is also relatively very bullish on the stock, designating 0.25 percent of its 13F equity portfolio to ESMT.

Now, key hedge funds have jumped into EngageSmart, LLC (NYSE:ESMT) headfirst. Holocene Advisors, managed by Brandon Haley, initiated the most outsized position in EngageSmart, LLC (NYSE:ESMT). Holocene Advisors had $40.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $35.7 million investment in the stock during the quarter. The following funds were also among the new ESMT investors: Ken Griffin’s Citadel Investment Group, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s check out hedge fund activity in other stocks similar to EngageSmart, LLC (NYSE:ESMT). We will take a look at I-Mab (NASDAQ:IMAB), Medallia, Inc. (NYSE:MDLA), Canopy Growth Corporation (NASDAQ:CGC), nVent Electric plc (NYSE:NVT), LifeStance Health Group Inc. (NASDAQ:LFST), Altair Engineering Inc. (NASDAQ:ALTR), and AMN Healthcare Services Inc (NYSE:AMN). This group of stocks’ market values are similar to ESMT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $242 million in ESMT’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand LifeStance Health Group Inc. (NASDAQ:LFST) is the least popular one with only 9 bullish hedge fund positions. EngageSmart, LLC (NYSE:ESMT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESMT is 70.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately ESMT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ESMT were disappointed as the stock returned -35.7% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.

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