We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Evercore Inc. (NYSE:EVR) based on that data.
Evercore Inc. (NYSE:EVR) was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. EVR shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 33 hedge funds in our database with EVR positions at the end of the previous quarter. Our calculations also showed that EVR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Lindenbaum of Basswood Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the key hedge fund action surrounding Evercore Inc. (NYSE:EVR).
What have hedge funds been doing with Evercore Inc. (NYSE:EVR)?
Heading into the first quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in EVR over the last 18 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.
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Evercore Inc. (NYSE:EVR), worth close to $69.3 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $51.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Noam Gottesman’s GLG Partners, Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position BlueMar Capital Management allocated the biggest weight to Evercore Inc. (NYSE:EVR), around 1.23% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to EVR.
Judging by the fact that Evercore Inc. (NYSE:EVR) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Robert B. Gillam’s McKinley Capital Management said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth about $5.5 million in stock, and Ravi Chopra’s Azora Capital was right behind this move, as the fund dropped about $4.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Evercore Inc. (NYSE:EVR) but similarly valued. We will take a look at Inovalon Holdings Inc (NASDAQ:INOV), Telephone & Data Systems, Inc. (NYSE:TDS), Quaker Chemical Corp (NYSE:KWR), and AMN Healthcare Services Inc (NYSE:AMN). This group of stocks’ market valuations resemble EVR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INOV | 16 | 82039 | 5 |
| TDS | 22 | 269898 | -7 |
| KWR | 9 | 156162 | -10 |
| AMN | 10 | 51628 | 1 |
| Average | 14.25 | 139932 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $316 million in EVR’s case. Telephone & Data Systems, Inc. (NYSE:TDS) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Evercore Inc. (NYSE:EVR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately EVR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EVR were disappointed as the stock returned -40.4% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
