How Hedge Funds Traded the Double Eagle Acquisition Corp (EAGLU) IPO

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Double Eagle Acquisition Corp (NASDAQ:EAGLU).

Double Eagle Acquisition Corp  shareholders have witnessed an increase in hedge fund sentiment in recent months, with 21 investors now holding the stock in their portfolios, where previously there were none. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Xencor Inc (NASDAQ:XNCR), Carmike Cinemas, Inc. (NASDAQ:CKEC), and Mag Silver Corp (USA) (NYSEMKT:MVG) to gather more data points.

In the 21st century investor’s toolkit there are dozens of indicators market participants have at their disposal to value their stock investments. A duo of the most under-the-radar indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the broader indices by a very impressive margin (see the details here).

With all of this in mind, let’s review the new action encompassing Double Eagle Acquisition Corp (NASDAQ:EAGLU).

Hedge fund activity in Double Eagle Acquisition Corp (NASDAQ:EAGLU)

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or had already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nick Niell’s Arrowgrass Capital Partners has the number one position in Double Eagle Acquisition Corp (NASDAQ:EAGLU), worth close to $25.4 million, comprising 0.5% of its total 13F portfolio. The second-largest stake is held by Andrew Feldstein and Stephen Siderow of Blue Mountain Capital, with a $25.4 million position; 0.5% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Anand Parekh’s Alyeska Investment Group, Fir Tree, founded by Jeffrey Tannenbaum, and Louis Bacon’s Moore Global Investments. All of these positions were new ones.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Double Eagle Acquisition Corp (NASDAQ:EAGLU) but similarly valued. We will take a look at Xencor Inc (NASDAQ:XNCR), Carmike Cinemas, Inc. (NASDAQ:CKEC), Mag Silver Corp (USA) (NYSEMKT:MVG), and Xunlei Ltd (NASDAQ:XNET). All of these stocks’ market caps are similar to EAGLU’s market cap.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $188 million in EAGLU’s case. Carmike Cinemas, Inc. (NASDAQ:CKEC) is the most popular stock in this table. On the other hand Xunlei Ltd (NASDAQ:XNET) is the least popular one with only 6 bullish hedge fund positions. Double Eagle Acquisition Corp (NASDAQ:EAGLU) is not the most popular stock in this group but hedge fund interest is still above average and there is more money invested in it than any of the other mentioned stocks. This is a positive signal and makes the stock a worthwhile candidate to consider a long position in.