It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Evolent Health Inc (NYSE:EVH).
Evolent Health Inc (NYSE:EVH) shareholders have witnessed a decrease in hedge fund sentiment lately. EVH was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. There were 19 hedge funds in our database with EVH holdings at the end of the previous quarter. Our calculations also showed that EVH 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.
If you’d ask most investors, hedge funds are assumed to be slow, old investment tools of yesteryear. While there are more than 8000 funds trading at the moment, Our researchers look at the crème de la crème of this group, around 750 funds. These hedge fund managers handle most of all hedge funds’ total asset base, and by paying attention to their inimitable investments, Insider Monkey has discovered numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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. Let’s take a look at the fresh hedge fund action regarding Evolent Health Inc (NYSE:EVH).
What have hedge funds been doing with Evolent Health Inc (NYSE:EVH)?
At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EVH over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Paul Marshall and Ian Wace’s Marshall Wace LLP has the largest position in Evolent Health Inc (NYSE:EVH), worth close to $12.8 million, accounting for 0.1% of its total 13F portfolio. On Marshall Wace LLP’s heels is Sectoral Asset Management, led by Jerome Pfund and Michael Sjostrom, holding a $10.8 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Chuck Royce’s Royce & Associates, Vishal Saluja and Pham Quang’s Endurant Capital Management and John A. Levin’s Levin Capital Strategies.
Seeing as Evolent Health Inc (NYSE:EVH) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers that decided to sell off their positions entirely in the second quarter. Intriguingly, George McCabe’s Portolan Capital Management sold off the largest position of all the hedgies followed by Insider Monkey, totaling about $9.1 million in stock, and Eli Casdin’s Casdin Capital was right behind this move, as the fund sold off about $6.9 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Evolent Health Inc (NYSE:EVH) but similarly valued. These stocks are Hanger, Inc. (NYSE:HNGR), United Insurance Holdings Corp. (NASDAQ:UIHC), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), and Ingles Markets, Incorporated (NASDAQ:IMKTA). This group of stocks’ market valuations are closest to EVH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HNGR | 17 | 122497 | -5 |
| UIHC | 8 | 7316 | 1 |
| IRCP | 4 | 20368 | 0 |
| IMKTA | 13 | 45991 | 2 |
| Average | 10.5 | 49043 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $52 million in EVH’s case. Hanger, Inc. (NYSE:HNGR) is the most popular stock in this table. On the other hand IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP) is the least popular one with only 4 bullish hedge fund positions. Evolent Health Inc (NYSE:EVH) 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 EVH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EVH were disappointed as the stock returned -9.6% 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.
