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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Essent Group Ltd (NYSE:ESNT) to find out whether there were any major changes in hedge funds' views.
Is ESNT a good stock to buy now? Essent Group Ltd (NYSE:ESNT) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Essent Group Ltd (NYSE:ESNT) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 36. Our calculations also showed that ESNT 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.
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Israel Englander of Millennium Management
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. With all of this in mind we're going to review the latest hedge fund action regarding Essent Group Ltd (NYSE:ESNT).
Do Hedge Funds Think ESNT Is A Good Stock To Buy Now?
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in ESNT a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rima Senvest Management held the most valuable stake in Essent Group Ltd (NYSE:ESNT), which was worth $93.7 million at the end of the third quarter. On the second spot was Polar Capital which amassed $81.4 million worth of shares. King Street Capital, Alyeska Investment Group, and BlueMar Capital 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 Rima Senvest Management allocated the biggest weight to Essent Group Ltd (NYSE:ESNT), around 5.32% of its 13F portfolio. Beach Point Capital Management is also relatively very bullish on the stock, earmarking 2.85 percent of its 13F equity portfolio to ESNT.
Due to the fact that Essent Group Ltd (NYSE:ESNT) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their entire stakes heading into Q4. Intriguingly, Sander Gerber's Hudson Bay Capital Management said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, valued at about $6.3 million in stock. Matthew L Pinz's fund, Pinz Capital, also sold off its stock, about $2.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 7 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Essent Group Ltd (NYSE:ESNT). These stocks are Meritage Homes Corp (NYSE:MTH), Neogen Corporation (NASDAQ:NEOG), Cabot Microelectronics Corporation (NASDAQ:CCMP), Envestnet Inc (NYSE:ENV), Futu Holdings Limited (NASDAQ:FUTU), Noble Energy, Inc. (NYSE:NBL), and Pure Storage, Inc. (NYSE:PSTG). This group of stocks' market values resemble ESNT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTH,25,339658,-3 NEOG,18,43051,0 CCMP,15,120272,-8 ENV,25,165485,6 FUTU,15,102562,7 NBL,45,753639,7 PSTG,22,223929,-7 Average,23.6,249799,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $242 million in ESNT's case. Noble Energy, Inc. (NYSE:NBL) is the most popular stock in this table. On the other hand Cabot Microelectronics Corporation (NASDAQ:CCMP) is the least popular one with only 15 bullish hedge fund positions. Essent Group Ltd (NYSE:ESNT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ESNT is 28. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ESNT as the stock returned 16% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.