Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Eros STX Global Corporation (NYSE:ESGC) to find out whether there were any major changes in hedge funds’ views.
Eros STX Global Corporation (NYSE:ESGC) investors should be aware of a decrease in hedge fund sentiment lately. Eros STX Global Corporation (NYSE:ESGC) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 19. There were 14 hedge funds in our database with ESGC holdings at the end of March. Our calculations also showed that ESGC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium 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. With all of this in mind let’s take a gander at the fresh hedge fund action encompassing Eros STX Global Corporation (NYSE:ESGC).
Do Hedge Funds Think ESGC Is A Good Stock To Buy Now?
At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ESGC over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Paradice Investment Management was the largest shareholder of Eros STX Global Corporation (NYSE:ESGC), with a stake worth $16.5 million reported as of the end of June. Trailing Paradice Investment Management was Roumell Asset Management, which amassed a stake valued at $3.9 million. Marshall Wace LLP, First Pacific Advisors LLC, and Renaissance Technologies 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 Roumell Asset Management allocated the biggest weight to Eros STX Global Corporation (NYSE:ESGC), around 4.56% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, dishing out 0.77 percent of its 13F equity portfolio to ESGC.
Judging by the fact that Eros STX Global Corporation (NYSE:ESGC) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers who were dropping their full holdings by the end of the second quarter. Intriguingly, David Rosen’s Rubric Capital Management dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $19 million in stock, and Jerome L. Simon’s Lonestar Capital Management was right behind this move, as the fund dropped about $2.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Eros STX Global Corporation (NYSE:ESGC) but similarly valued. These stocks are Brightcove Inc (NASDAQ:BCOV), Triterras, Inc. (NASDAQ:TRIT), Verso Corporation (NYSE:VRS), Cambridge Bancorp (NASDAQ:CATC), AC Immune SA (NASDAQ:ACIU), Gilat Satellite Networks Ltd. (NASDAQ:GILT), and Big 5 Sporting Goods Corporation (NASDAQ:BGFV). This group of stocks’ market values are closest to ESGC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCOV | 16 | 199892 | -5 |
| TRIT | 10 | 16981 | -2 |
| VRS | 17 | 68479 | 2 |
| CATC | 6 | 20427 | 1 |
| ACIU | 13 | 104856 | 0 |
| GILT | 7 | 25911 | -1 |
| BGFV | 19 | 43184 | 5 |
| Average | 12.6 | 68533 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $25 million in ESGC’s case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand Cambridge Bancorp (NASDAQ:CATC) is the least popular one with only 6 bullish hedge fund positions. Eros STX Global Corporation (NYSE:ESGC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ESGC is 32.2. 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 negative signal and 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately ESGC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ESGC investors were disappointed as the stock returned -39.2% since the end of June (through 9/27) 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 most of these stocks already outperformed the market in 2021.
Follow Eros Stx Global Corporation (NYSE:ESGC)
Follow Eros Stx Global Corporation (NYSE:ESGC)
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Disclosure: None. This article was originally published at Insider Monkey.
