Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Entravision Communications Corporation (NYSE:EVC) and see how the stock is affected by the recent hedge fund activity.
Entravision Communications Corporation (NYSE:EVC) was in 11 hedge funds’ portfolios at the end of March. EVC has experienced a decrease in activity from the world’s largest hedge funds in recent months. There were 12 hedge funds in our database with EVC holdings at the end of the previous quarter. Our calculations also showed that EVC isn’t among the 30 most popular stocks among hedge funds.
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 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.
Cliff Asness of AQR Capital Management
Let’s take a look at the recent hedge fund action regarding Entravision Communications Corporation (NYSE:EVC).
What does smart money think about Entravision Communications Corporation (NYSE:EVC)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in EVC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Entravision Communications Corporation (NYSE:EVC) was held by AQR Capital Management, which reported holding $7.7 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $4.5 million position. Other investors bullish on the company included D E Shaw, Two Sigma Advisors, and Millennium Management.
Judging by the fact that Entravision Communications Corporation (NYSE:EVC) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who sold off their positions entirely last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the biggest position of the 700 funds followed by Insider Monkey, valued at about $0.9 million in stock, and Mario Gabelli’s GAMCO Investors was right behind this move, as the fund dumped about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Entravision Communications Corporation (NYSE:EVC) but similarly valued. We will take a look at Metropolitan Bank Holding Corp. (NYSE:MCB), USD Partners LP (NYSE:USDP), Nordic American Tankers Ltd (NYSE:NAT), and Southern Missouri Bancorp, Inc. (NASDAQ:SMBC). All of these stocks’ market caps match EVC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCB | 8 | 53783 | 1 |
| USDP | 4 | 3866 | 3 |
| NAT | 7 | 5932 | 1 |
| SMBC | 4 | 14902 | 2 |
| Average | 5.75 | 19621 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $18 million in EVC’s case. Metropolitan Bank Holding Corp. (NYSE:MCB) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Entravision Communications Corporation (NYSE:EVC) is more popular among hedge funds. 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. Unfortunately EVC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EVC were disappointed as the stock returned -4.3% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
