At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Enviva Partners, LP (NYSE:EVA).
Enviva Partners, LP (NYSE:EVA) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as TiVo Corporation (NASDAQ:TIVO), Brookline Bancorp, Inc. (NASDAQ:BRKL), and Perficient, Inc. (NASDAQ:PRFT) to gather more data points. Our calculations also showed that EVA isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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. 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 S&P 500 ETFs by 58 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 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.
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Matthew Drapkin of Becker Drapkin Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the key hedge fund action regarding Enviva Partners, LP (NYSE:EVA).
How are hedge funds trading Enviva Partners, LP (NYSE:EVA)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EVA over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Enviva Partners, LP (NYSE:EVA) was held by ValueAct Capital, which reported holding $67.5 million worth of stock at the end of September. It was followed by Ardsley Partners with a $13.2 million position. Other investors bullish on the company included Becker Drapkin Management, Brasada Capital Management, and Prescott Group Capital Management. In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to Enviva Partners, LP (NYSE:EVA), around 5.16% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, setting aside 3.72 percent of its 13F equity portfolio to EVA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Prescott Group Capital Management).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Enviva Partners, LP (NYSE:EVA) but similarly valued. We will take a look at TiVo Corporation (NASDAQ:TIVO), Brookline Bancorp, Inc. (NASDAQ:BRKL), Perficient, Inc. (NASDAQ:PRFT), and Sandstorm Gold Ltd. (NYSE:SAND). All of these stocks' market caps match EVA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TIVO,20,72022,-6 BRKL,8,44967,-3 PRFT,21,58816,-2 SAND,13,64388,0 Average,15.5,60048,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $86 million in EVA's case. Perficient, Inc. (NASDAQ:PRFT) is the most popular stock in this table. On the other hand Brookline Bancorp, Inc. (NASDAQ:BRKL) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Enviva Partners, LP (NYSE:EVA) is even less popular than BRKL. Hedge funds clearly dropped the ball on EVA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on EVA as the stock returned 33.8% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.