Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Evolent Health Inc (NYSE:EVH) was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2018. EVH shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 13 hedge funds in our database with EVH positions at the end of the previous quarter. Our calculations also showed that evh 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 32 percentage points since May 2014 through March 12, 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.
Let’s view the latest hedge fund action regarding Evolent Health Inc (NYSE:EVH).
What does the smart money think about Evolent Health Inc (NYSE:EVH)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in EVH a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in Evolent Health Inc (NYSE:EVH). Millennium Management has a $40.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Columbus Circle Investors, led by Principal Global Investors, holding a $22.5 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish encompass Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Eli Casdin’s Casdin Capital and D. E. Shaw’s D E Shaw.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Evolent Health Inc (NYSE:EVH). Point72 Asset Management had $3.5 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $2.1 million position during the quarter. The other funds with brand new EVH positions are Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management, and Cliff Asness’s AQR Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Evolent Health Inc (NYSE:EVH) but similarly valued. We will take a look at Endo International plc (NASDAQ:ENDP), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), BancFirst Corporation (NASDAQ:BANF), and FBL Financial Group, Inc. (NYSE:FFG). This group of stocks’ market caps are similar to EVH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENDP | 23 | 269495 | 1 |
| BHVN | 22 | 324574 | 4 |
| BANF | 9 | 40349 | 2 |
| FFG | 6 | 4443 | 2 |
| Average | 15 | 159715 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $108 million in EVH’s case. Endo International plc (NASDAQ:ENDP) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 6 bullish hedge fund positions. Evolent Health Inc (NYSE:EVH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EVH wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); EVH investors were disappointed as the stock returned -31.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
