Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article, we analyze how these elite funds and prominent investors traded Endo International plc (NASDAQ:ENDP) based on 4+ years of 13F filings.
Endo International plc (NASDAQ:ENDP) has seen a decrease in hedge fund interest in recent months. Our calculations also showed that ENDP 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).
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.
Bill Miller of Miller Value Partners
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 we’re going to take a look at the new hedge fund action surrounding Endo International plc (NASDAQ:ENDP).
How have hedgies been trading Endo International plc (NASDAQ:ENDP)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ENDP over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Glenview Capital held the most valuable stake in Endo International plc (NASDAQ:ENDP), which was worth $86.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $76.4 million worth of shares. Miller Value Partners, Paulson & Co, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Miller Value Partners allocated the biggest weight to Endo International plc (NASDAQ:ENDP), around 2.59% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to ENDP.
Judging by the fact that Endo International plc (NASDAQ:ENDP) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that elected to cut their entire stakes last quarter. At the top of the heap, Francis Chou’s Chou Associates Management dropped the largest investment of the 750 funds tracked by Insider Monkey, totaling about $1.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Endo International plc (NASDAQ:ENDP). These stocks are Renewable Energy Group Inc (NASDAQ:REGI), CNX Midstream Partners LP (NYSE:CNXM), MSG Networks Inc (NYSE:MSGN), and Nabors Industries Ltd. (NYSE:NBR). This group of stocks’ market caps match ENDP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REGI | 21 | 222864 | 5 |
| CNXM | 5 | 19604 | -1 |
| MSGN | 28 | 304873 | -6 |
| NBR | 21 | 148138 | 1 |
| Average | 18.75 | 173870 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $294 million in ENDP’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 5 bullish hedge fund positions. Endo International plc (NASDAQ:ENDP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on ENDP, though not to the same extent, as the stock returned -5.5% during the same time period and outperformed the market.
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.
