Hedge Funds Are Crazy About e.l.f. Beauty, Inc. (ELF)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of e.l.f. Beauty, Inc. (NYSE:ELF).

e.l.f. Beauty, Inc. (NYSE:ELF) has seen an increase in hedge fund interest in recent months. e.l.f. Beauty, Inc. (NYSE:ELF) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 21 hedge funds in our database with ELF holdings at the end of March. Our calculations also showed that ELF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the latest hedge fund action surrounding e.l.f. Beauty, Inc. (NYSE:ELF).

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

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in ELF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Portolan Capital Management, managed by George McCabe, holds the number one position in e.l.f. Beauty, Inc. (NYSE:ELF). Portolan Capital Management has a $28.6 million position in the stock, comprising 2.1% of its 13F portfolio. On Portolan Capital Management’s heels is Renaissance Technologies, holding a $28.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Israel Englander’s Millennium Management, Angela Aldrich’s Bayberry Capital Partners and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Bayberry Capital Partners allocated the biggest weight to e.l.f. Beauty, Inc. (NYSE:ELF), around 5.64% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, dishing out 2.06 percent of its 13F equity portfolio to ELF.

Consequently, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in e.l.f. Beauty, Inc. (NYSE:ELF). Arrowstreet Capital had $4.6 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $2.6 million position during the quarter. The following funds were also among the new ELF investors: Paul Tudor Jones’s Tudor Investment Corp, Michael Gelband’s ExodusPoint Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as e.l.f. Beauty, Inc. (NYSE:ELF) but similarly valued. These stocks are Radware Ltd. (NASDAQ:RDWR), Kaman Corporation (NYSE:KAMN), Materialise NV (NASDAQ:MTLS), Canaan Inc. (NASDAQ:CAN), James River Group Holdings Ltd (NASDAQ:JRVR), Montrose Environmental Group, Inc. (NYSE:MEG), and Dime Community Bancshares, Inc. (NASDAQ:DCOM). This group of stocks’ market valuations are similar to ELF’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $150 million in ELF’s case. Radware Ltd. (NASDAQ:RDWR) is the most popular stock in this table. On the other hand Montrose Environmental Group, Inc. (NYSE:MEG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks e.l.f. Beauty, Inc. (NYSE:ELF) is more popular among hedge funds. Our overall hedge fund sentiment score for ELF is 90. 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on ELF as the stock returned 7.3% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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