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We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Everbridge, Inc. (NASDAQ:EVBG).
Is Everbridge, Inc. (NASDAQ:EVBG) a splendid investment right now? Money managers are in a pessimistic mood. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that EVBG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Philippe Laffont of Coatue Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to view the latest hedge fund action surrounding Everbridge, Inc. (NASDAQ:EVBG).
How are hedge funds trading Everbridge, Inc. (NASDAQ:EVBG)?
At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in EVBG 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.
The largest stake in Everbridge, Inc. (NASDAQ:EVBG) was held by Select Equity Group, which reported holding $164.7 million worth of stock at the end of September. It was followed by Sylebra Capital Management with a $53 million position. Other investors bullish on the company included Valinor Management, Polar Capital, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Alta Park Capital allocated the biggest weight to Everbridge, Inc. (NASDAQ:EVBG), around 5.73% of its 13F portfolio. Valinor Management is also relatively very bullish on the stock, dishing out 3.29 percent of its 13F equity portfolio to EVBG.
Judging by the fact that Everbridge, Inc. (NASDAQ:EVBG) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of hedgies that elected to cut their entire stakes heading into Q4. Intriguingly, Glen Kacher's Light Street Capital cut the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $45 million in stock, and Adam Parker's Center Lake Capital was right behind this move, as the fund dropped about $29.5 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Everbridge, Inc. (NASDAQ:EVBG) but similarly valued. We will take a look at SeaWorld Entertainment Inc (NYSE:SEAS), Alliance Resource Partners, L.P. (NASDAQ:ARLP), CoreCivic, Inc. (NYSE:CXW), and 8x8, Inc. (NYSE:EGHT). All of these stocks' market caps are similar to EVBG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEAS,32,998661,0 ARLP,7,89565,-2 CXW,17,173840,3 EGHT,22,452982,2 Average,19.5,428762,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $409 million in EVBG's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 7 bullish hedge fund positions. Everbridge, Inc. (NASDAQ:EVBG) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on EVBG, though not to the same extent, as the stock returned 37.6% during 2019 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.