“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. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Encore Capital Group, Inc. (NASDAQ:ECPG) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Encore Capital Group, Inc. (NASDAQ:ECPG) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that ECPG isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a lot of metrics shareholders employ to evaluate stocks. Two of the most useful metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can outclass the market by a very impressive margin (see the details here).
We’re going to take a gander at the recent hedge fund action encompassing Encore Capital Group, Inc. (NASDAQ:ECPG).
What does smart money think about Encore Capital Group, Inc. (NASDAQ:ECPG)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ECPG over the last 15 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.
Among these funds, BloombergSen held the most valuable stake in Encore Capital Group, Inc. (NASDAQ:ECPG), which was worth $20 million at the end of the first quarter. On the second spot was Second Curve Capital which amassed $13.7 million worth of shares. Moreover, EJF Capital, Marshall Wace LLP, and Laurion Capital Management were also bullish on Encore Capital Group, Inc. (NASDAQ:ECPG), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key money managers were breaking ground themselves. EJF Capital, managed by Emanuel J. Friedman, initiated the most valuable position in Encore Capital Group, Inc. (NASDAQ:ECPG). EJF Capital had $7.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $6.7 million investment in the stock during the quarter. The other funds with brand new ECPG positions are Benjamin A. Smith’s Laurion Capital Management, Anand Parekh’s Alyeska Investment Group, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Encore Capital Group, Inc. (NASDAQ:ECPG) but similarly valued. We will take a look at Movado Group, Inc (NYSE:MOV), Meridian Bancorp, Inc. (NASDAQ:EBSB), Addus Homecare Corporation (NASDAQ:ADUS), and ANI Pharmaceuticals Inc (NASDAQ:ANIP). This group of stocks’ market values are closest to ECPG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOV | 23 | 73287 | 0 |
| EBSB | 15 | 75687 | 5 |
| ADUS | 14 | 73546 | 0 |
| ANIP | 17 | 82176 | 4 |
| Average | 17.25 | 76174 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $61 million in ECPG’s case. Movado Group, Inc (NYSE:MOV) is the most popular stock in this table. On the other hand Addus Homecare Corporation (NASDAQ:ADUS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Encore Capital Group, Inc. (NASDAQ:ECPG) is even less popular than ADUS. Hedge funds clearly dropped the ball on ECPG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ECPG as the stock returned 27.8% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
