We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards The Ensign Group, Inc. (NASDAQ:ENSG).
Is The Ensign Group, Inc. (NASDAQ:ENSG) a sound investment now? The smart money is selling. The number of long hedge fund positions fell by 3 lately. Our calculations also showed that ENSG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ENSG was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 18 hedge funds in our database with ENSG positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the latest hedge fund action regarding The Ensign Group, Inc. (NASDAQ:ENSG).
What does smart money think about The Ensign Group, Inc. (NASDAQ:ENSG)?
Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in ENSG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Ensign Group, Inc. (NASDAQ:ENSG) was held by Eversept Partners, which reported holding $30.7 million worth of stock at the end of September. It was followed by Millennium Management with a $21.4 million position. Other investors bullish on the company included Polar Capital, Winton Capital Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to The Ensign Group, Inc. (NASDAQ:ENSG), around 5.95% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to ENSG.
Due to the fact that The Ensign Group, Inc. (NASDAQ:ENSG) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers who sold off their positions entirely heading into Q4. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $1.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $1.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Ensign Group, Inc. (NASDAQ:ENSG) but similarly valued. We will take a look at Saia Inc (NASDAQ:SAIA), Pluralsight, Inc. (NASDAQ:PS), Visteon Corp (NYSE:VC), and Chart Industries, Inc. (NASDAQ:GTLS). This group of stocks’ market values resemble ENSG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAIA | 17 | 86146 | 1 |
| PS | 18 | 152506 | -4 |
| VC | 29 | 276807 | 6 |
| GTLS | 19 | 268582 | -4 |
| Average | 20.75 | 196010 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $127 million in ENSG’s case. Visteon Corp (NYSE:VC) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks The Ensign Group, Inc. (NASDAQ:ENSG) is even less popular than SAIA. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on ENSG, though not to the same extent, as the stock returned -22.4% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
