With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Endurance International Group Holdings Inc (NASDAQ:EIGI).
Endurance International Group Holdings Inc (NASDAQ:EIGI) has seen an increase in hedge fund sentiment of late. EIGI was in 13 hedge funds' portfolios at the end of the third quarter of 2019. There were 11 hedge funds in our database with EIGI positions at the end of the previous quarter. Our calculations also showed that EIGI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). 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.
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to analyze the recent hedge fund action regarding Endurance International Group Holdings Inc (NASDAQ:EIGI).
What have hedge funds been doing with Endurance International Group Holdings Inc (NASDAQ:EIGI)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EIGI over the last 17 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Endurance International Group Holdings Inc (NASDAQ:EIGI) was held by Okumus Fund Management, which reported holding $54.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.3 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Okumus Fund Management allocated the biggest weight to Endurance International Group Holdings Inc (NASDAQ:EIGI), around 14.88% of its 13F portfolio. BlueCrest Capital Mgmt. is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to EIGI.
Consequently, key money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Endurance International Group Holdings Inc (NASDAQ:EIGI). Millennium Management had $6.6 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1.1 million investment in the stock during the quarter. The other funds with brand new EIGI positions are Michael Platt and William Reeves's BlueCrest Capital Mgmt. and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Endurance International Group Holdings Inc (NASDAQ:EIGI) but similarly valued. These stocks are One Liberty Properties, Inc. (NYSE:OLP), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), Team, Inc. (NYSE:TISI), and Antares Pharma Inc (NASDAQ:ATRS). This group of stocks' market valuations match EIGI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OLP,5,30386,1 CPRX,12,124014,2 TISI,13,89501,1 ATRS,11,27672,1 Average,10.25,67893,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $80 million in EIGI's case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand One Liberty Properties, Inc. (NYSE:OLP) is the least popular one with only 5 bullish hedge fund positions. Endurance International Group Holdings Inc (NASDAQ:EIGI) 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 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 EIGI, though not to the same extent, as the stock returned 8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.