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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Elevate Credit, Inc. (NYSE:ELVT).
Is ELVT a good stock to buy now? Elevate Credit, Inc. (NYSE:ELVT) has experienced a decrease in hedge fund interest lately. Elevate Credit, Inc. (NYSE:ELVT) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. There were 13 hedge funds in our database with ELVT holdings at the end of June. Our calculations also showed that ELVT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to review the new hedge fund action regarding Elevate Credit, Inc. (NYSE:ELVT).
Do Hedge Funds Think ELVT Is A Good Stock To Buy Now?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ELVT over the last 21 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Elevate Credit, Inc. (NYSE:ELVT), which was worth $3.3 million at the end of the third quarter. On the second spot was Intrinsic Edge Capital which amassed $1 million worth of shares. Arrowstreet Capital, Millennium Management, and D E Shaw 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 Intrinsic Edge Capital allocated the biggest weight to Elevate Credit, Inc. (NYSE:ELVT), around 0.07% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to ELVT.
Because Elevate Credit, Inc. (NYSE:ELVT) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there exists a select few funds that elected to cut their full holdings by the end of the third quarter. Interestingly, Donald Sussman's Paloma Partners dropped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $0.1 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also cut its stock, about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Elevate Credit, Inc. (NYSE:ELVT). These stocks are Mesa Air Group, Inc. (NASDAQ:MESA), cbdMD, Inc. (NYSE:YCBD), RR Donnelley & Sons Company (NASDAQ:RRD), Qualigen Therapeutics, Inc. (NASDAQ:QLGN), Lizhi Inc. (NASDAQ:LIZI), The Goldfield Corporation (NYSE:GV), and United Security Bancshares (NASDAQ:UBFO). All of these stocks' market caps are similar to ELVT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MESA,10,16914,-1 YCBD,3,638,-1 RRD,8,16264,-5 QLGN,1,266,0 LIZI,2,133,1 GV,1,9051,0 UBFO,3,1563,0 Average,4,6404,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $7 million in ELVT's case. Mesa Air Group, Inc. (NASDAQ:MESA) is the most popular stock in this table. On the other hand Qualigen Therapeutics, Inc. (NASDAQ:QLGN) is the least popular one with only 1 bullish hedge fund positions. Elevate Credit, Inc. (NYSE:ELVT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ELVT is 75.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ELVT as the stock returned 23.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.