We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 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 Encore Capital Group, Inc. (NASDAQ:ECPG).
Encore Capital Group, Inc. (NASDAQ:ECPG) investors should be aware of an increase in enthusiasm from smart money recently. ECPG was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. There were 8 hedge funds in our database with ECPG holdings at the end of the previous quarter. Our calculations also showed that ECPG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the recent hedge fund action regarding Encore Capital Group, Inc. (NASDAQ:ECPG).
How are hedge funds trading Encore Capital Group, Inc. (NASDAQ:ECPG)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ECPG over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jonathan Bloomberg’s BloombergSen has the biggest position in Encore Capital Group, Inc. (NASDAQ:ECPG), worth close to $25.3 million, comprising 1.5% of its total 13F portfolio. The second most bullish fund manager is Tom Brown of Second Curve Capital, with a $16.6 million position; the fund has 10.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise David E. Shaw’s D E Shaw, Emanuel J. Friedman’s EJF Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Second Curve Capital allocated the biggest weight to Encore Capital Group, Inc. (NASDAQ:ECPG), around 10.13% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, dishing out 1.51 percent of its 13F equity portfolio to ECPG.
Now, key money managers were breaking ground themselves. EJF Capital, managed by Emanuel J. Friedman, created the largest position in Encore Capital Group, Inc. (NASDAQ:ECPG). EJF Capital had $4.1 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $0.6 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Encore Capital Group, Inc. (NASDAQ:ECPG). We will take a look at Apogee Enterprises, Inc. (NASDAQ:APOG), ePlus Inc. (NASDAQ:PLUS), H&E Equipment Services, Inc. (NASDAQ:HEES), and 2U Inc (NASDAQ:TWOU). This group of stocks’ market values are similar to ECPG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APOG | 12 | 130115 | 0 |
| PLUS | 12 | 43114 | 0 |
| HEES | 13 | 52420 | 1 |
| TWOU | 14 | 88368 | 0 |
| Average | 12.75 | 78504 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $65 million in ECPG’s case. 2U Inc (NASDAQ:TWOU) is the most popular stock in this table. On the other hand Apogee Enterprises, Inc. (NASDAQ:APOG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Encore Capital Group, Inc. (NASDAQ:ECPG) is even less popular than APOG. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ECPG, though not to the same extent, as the stock returned 9.4% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
