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Is Endo International plc (ENDP) Going to Burn These Hedge Funds?

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Is Endo International plc (NASDAQ:ENDP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Endo International plc (NASDAQ:ENDP) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 61. ENDP has experienced an increase in enthusiasm from smart money lately. There were 17 hedge funds in our database with ENDP positions at the end of the first quarter. Our calculations also showed that ENDP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

largest hedge funds in the world
largest hedge funds in the world

John Paulson of Paulson & Co

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a look at the key hedge fund action encompassing Endo International plc (NASDAQ:ENDP).

Do Hedge Funds Think ENDP Is A Good Stock To Buy Now?

At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in ENDP a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Paulson & Co was the largest shareholder of Endo International plc (NASDAQ:ENDP), with a stake worth $85.8 million reported as of the end of June. Trailing Paulson & Co was Renaissance Technologies, which amassed a stake valued at $82.4 million. Glenview Capital, Contrarius Investment Management, and Millennium Management 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 Tri Locum Partners allocated the biggest weight to Endo International plc (NASDAQ:ENDP), around 2.44% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, dishing out 2.05 percent of its 13F equity portfolio to ENDP.

Consequently, specific money managers have jumped into Endo International plc (NASDAQ:ENDP) headfirst. Tri Locum Partners, managed by Prashanth Jayaram, established the most valuable call position in Endo International plc (NASDAQ:ENDP). Tri Locum Partners had $4.9 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also initiated a $4.2 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Peter Muller's PDT Partners, and Seth Fischer's Oasis Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Endo International plc (NASDAQ:ENDP) but similarly valued. We will take a look at Lydall, Inc. (NYSE:LDL), Montauk Renewables, Inc. (NASDAQ:MNTK), Nam Tai Property Inc (NYSE:NTP), World Acceptance Corp. (NASDAQ:WRLD), AudioCodes Ltd. (NASDAQ:AUDC), Dyne Therapeutics, Inc. (NASDAQ:DYN), and Ocular Therapeutix Inc (NASDAQ:OCUL). All of these stocks' market caps match ENDP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LDL,22,210877,10 MNTK,6,3533,1 NTP,3,144269,-1 WRLD,6,128087,-1 AUDC,13,35353,-2 DYN,23,301554,2 OCUL,23,209153,3 Average,13.7,147547,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $228 million in ENDP's case. Dyne Therapeutics, Inc. (NASDAQ:DYN) is the most popular stock in this table. On the other hand Nam Tai Property Inc (NYSE:NTP) is the least popular one with only 3 bullish hedge fund positions. Endo International plc (NASDAQ:ENDP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ENDP is 60.3. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ENDP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ENDP were disappointed as the stock returned -2.6% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.