Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Evolent Health Inc (NYSE:EVH) changed recently.
Evolent Health Inc (NYSE:EVH) investors should be aware of an increase in hedge fund sentiment of late. Evolent Health Inc (NYSE:EVH) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EVH 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.
Glenn Welling of Engaged Capital
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. Now we’re going to take a look at the new hedge fund action surrounding Evolent Health Inc (NYSE:EVH).
Do Hedge Funds Think EVH Is A Good Stock To Buy Now?
At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in EVH a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Evolent Health Inc (NYSE:EVH) was held by Engaged Capital, which reported holding $180.6 million worth of stock at the end of June. It was followed by Rock Springs Capital Management with a $35.9 million position. Other investors bullish on the company included Sectoral Asset Management, Park West Asset Management, and Greenhouse Funds. In terms of the portfolio weights assigned to each position Engaged Capital allocated the biggest weight to Evolent Health Inc (NYSE:EVH), around 13.99% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, setting aside 6.31 percent of its 13F equity portfolio to EVH.
Now, some big names have jumped into Evolent Health Inc (NYSE:EVH) headfirst. Greenhouse Funds, managed by Joe Milano, initiated the largest position in Evolent Health Inc (NYSE:EVH). Greenhouse Funds had $21.4 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $3.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Lawrence Hawkins’s Prosight Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.
Let’s now take a look at hedge fund activity in other stocks similar to Evolent Health Inc (NYSE:EVH). These stocks are Knowles Corp (NYSE:KN), Betterware de Mexico, S.A.B. de C.V. (NASDAQ:BWMX), C4 Therapeutics, Inc. (NASDAQ:CCCC), OSI Systems, Inc. (NASDAQ:OSIS), Delek Logistics Partners LP (NYSE:DKL), Alamo Group, Inc. (NYSE:ALG), and Gol Linhas Aereas Inteligentes SA (NYSE:GOL). This group of stocks’ market values are closest to EVH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KN | 20 | 272849 | 2 |
| BWMX | 5 | 24187 | -1 |
| CCCC | 23 | 341981 | 3 |
| OSIS | 21 | 97299 | 1 |
| DKL | 3 | 5088 | 2 |
| ALG | 10 | 220181 | -2 |
| GOL | 10 | 20694 | 0 |
| Average | 13.1 | 140326 | 0.7 |
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 $140 million. That figure was $376 million in EVH’s case. C4 Therapeutics, Inc. (NASDAQ:CCCC) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Evolent Health Inc (NYSE:EVH) is more popular among hedge funds. Our overall hedge fund sentiment score for EVH is 87. 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% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on EVH as the stock returned 43.1% since the end of June (through 10/22) 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.
Follow Evolent Health Inc. (NYSE:EVH)
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Disclosure: None. This article was originally published at Insider Monkey.
