We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Evertec Inc (NYSE:EVTC).
Is Evertec Inc (NYSE:EVTC) an outstanding investment now? Prominent investors are in a bullish mood. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that EVTC isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. We’re going to go over the new hedge fund action encompassing Evertec Inc (NYSE:EVTC).
How have hedgies been trading Evertec Inc (NYSE:EVTC)?
At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in EVTC a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Rivulet Capital held the most valuable stake in Evertec Inc (NYSE:EVTC), which was worth $79.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $71.9 million worth of shares. Moreover, GLG Partners, Arrowstreet Capital, and AQR Capital Management were also bullish on Evertec Inc (NYSE:EVTC), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Evertec Inc (NYSE:EVTC) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Evertec Inc (NYSE:EVTC). Balyasny Asset Management had $12.1 million invested in the company at the end of the quarter. Ed Bosek’s BeaconLight Capital also initiated a $8.3 million position during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Minhua Zhang’s Weld Capital Management, and David Harding’s Winton Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Evertec Inc (NYSE:EVTC) but similarly valued. These stocks are Patterson-UTI Energy, Inc. (NASDAQ:PTEN), II-VI, Inc. (NASDAQ:IIVI), CareTrust REIT Inc (NASDAQ:CTRE), and Transportadora de Gas del Sur SA (NYSE:TGS). This group of stocks’ market valuations are closest to EVTC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTEN | 25 | 289200 | -9 |
| IIVI | 21 | 110008 | -1 |
| CTRE | 20 | 127935 | 4 |
| TGS | 9 | 28061 | -3 |
| Average | 18.75 | 138801 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $308 million in EVTC’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (NYSE:TGS) is the least popular one with only 9 bullish hedge fund positions. Evertec Inc (NYSE:EVTC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 EVTC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EVTC were disappointed as the stock returned -4.4% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
