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 6 percentage points during the first 5 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 The Ensign Group, Inc. (NASDAQ:ENSG).
Is The Ensign Group, Inc. (NASDAQ:ENSG) undervalued? Investors who are in the know are getting less bullish. The number of long hedge fund positions retreated by 1 in recent months. Our calculations also showed that ENSG isn’t among the 30 most popular stocks among hedge funds. ENSG was in 17 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with ENSG positions at the end of the previous quarter.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the latest hedge fund action regarding The Ensign Group, Inc. (NASDAQ:ENSG).
What have hedge funds been doing with The Ensign Group, Inc. (NASDAQ:ENSG)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in ENSG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Winton Capital Management, managed by David Harding, holds the number one position in The Ensign Group, Inc. (NASDAQ:ENSG). Winton Capital Management has a $21.4 million position in the stock, comprising 0.4% of its 13F portfolio. On Winton Capital Management’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $11.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Kamran Moghtaderi’s Eversept Partners, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.
Due to the fact that The Ensign Group, Inc. (NASDAQ:ENSG) has faced declining sentiment from hedge fund managers, it’s easy to see that there were a few funds who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling about $0.4 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to The Ensign Group, Inc. (NASDAQ:ENSG). We will take a look at Spectrum Brands Holdings, Inc. (NYSE:SPB), Tellurian Inc. (NASDAQ:TELL), National Beverage Corp. (NASDAQ:FIZZ), and AppFolio Inc (NASDAQ:APPF). All of these stocks’ market caps match ENSG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPB | 22 | 837403 | -3 |
| TELL | 16 | 125497 | 1 |
| FIZZ | 21 | 248749 | 0 |
| APPF | 15 | 230629 | 1 |
| Average | 18.5 | 360570 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $84 million in ENSG’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 15 bullish hedge fund positions. The Ensign Group, Inc. (NASDAQ:ENSG) is not the least popular stock in this group but hedge fund interest is still below average. 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 ENSG as the stock returned 12.6% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
