Should You Buy Enova International Inc (ENVA)?
We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 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 Enova International Inc (NYSE:ENVA).
Enova International Inc (NYSE:ENVA) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of September. At the end of this article we will also compare ENVA to other stocks including WAVE Life Sciences Ltd. (NASDAQ:WVE), Stoke Therapeutics, Inc. (NASDAQ:STOK), and U.S. Silica Holdings Inc (NYSE:SLCA) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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 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.
[caption id="attachment_26340" align="aligncenter" width="467"]
Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action encompassing Enova International Inc (NYSE:ENVA).
What have hedge funds been doing with Enova International Inc (NYSE:ENVA)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ENVA over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Enova International Inc (NYSE:ENVA) was held by Renaissance Technologies, which reported holding $53.4 million worth of stock at the end of September. It was followed by 683 Capital Partners with a $18.6 million position. Other investors bullish on the company included Prescott Group Capital Management, Citadel Investment Group, and Osterweis Capital Management. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Enova International Inc (NYSE:ENVA), around 2.99% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, designating 2.06 percent of its 13F equity portfolio to ENVA.
Seeing as Enova International Inc (NYSE:ENVA) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds who sold off their full holdings heading into Q4. It's worth mentioning that David Harding's Winton Capital Management said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, worth about $0.6 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Enova International Inc (NYSE:ENVA) but similarly valued. These stocks are WAVE Life Sciences Ltd. (NASDAQ:WVE), Stoke Therapeutics, Inc. (NASDAQ:STOK), U.S. Silica Holdings Inc (NYSE:SLCA), and JinkoSolar Holding Co., Ltd. (NYSE:JKS). All of these stocks' market caps match ENVA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WVE,17,260950,-3 STOK,10,117509,-8 SLCA,16,198147,-1 JKS,6,14103,-2 Average,12.25,147677,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $132 million in ENVA's case. WAVE Life Sciences Ltd. (NASDAQ:WVE) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Enova International Inc (NYSE:ENVA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ENVA as the stock returned 11% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
Related Content
