“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards The Ensign Group, Inc. (NASDAQ:ENSG).
The Ensign Group, Inc. (NASDAQ:ENSG) was in 14 hedge funds’ portfolios at the end of June. ENSG investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 17 hedge funds in our database with ENSG holdings at the end of the previous quarter. Our calculations also showed that ENSG isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the key hedge fund action surrounding The Ensign Group, Inc. (NASDAQ:ENSG).
How have hedgies been trading The Ensign Group, Inc. (NASDAQ:ENSG)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in ENSG a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Winton Capital Management held the most valuable stake in The Ensign Group, Inc. (NASDAQ:ENSG), which was worth $25.6 million at the end of the second quarter. On the second spot was Eversept Partners which amassed $17.4 million worth of shares. Moreover, AQR Capital Management, Polar Capital, and GLG Partners were also bullish on The Ensign Group, Inc. (NASDAQ:ENSG), allocating a large percentage of their portfolios to this stock.
Since The Ensign Group, Inc. (NASDAQ:ENSG) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who were dropping their full holdings by the end of the second quarter. At the top of the heap, David Costen Haley’s HBK Investments sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $1.8 million in stock, and Ian Cumming and Joseph Steinberg’s Leucadia National was right behind this move, as the fund sold off about $1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Ensign Group, Inc. (NASDAQ:ENSG) but similarly valued. We will take a look at Sibanye Gold Ltd (NYSE:SBGL), Acadia Healthcare Company Inc (NASDAQ:ACHC), Chesapeake Energy Corporation (NYSE:CHK), and Texas Capital Bancshares Inc (NASDAQ:TCBI). This group of stocks’ market values are similar to ENSG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBGL | 9 | 92525 | -3 |
| ACHC | 17 | 593650 | -2 |
| CHK | 18 | 96204 | -2 |
| TCBI | 19 | 237820 | 0 |
| Average | 15.75 | 255050 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $107 million in ENSG’s case. Texas Capital Bancshares Inc (NASDAQ:TCBI) is the most popular stock in this table. On the other hand Sibanye Gold Ltd (NYSE:SBGL) is the least popular one with only 9 bullish hedge fund positions. The Ensign Group, Inc. (NASDAQ:ENSG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ENSG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ENSG investors were disappointed as the stock returned -16.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
