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Essent Group Ltd (ESNT): Are Hedge Funds Right About This Stock?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Essent Group Ltd (NYSE:ESNT).

Is Essent Group Ltd (NYSE:ESNT) worth your attention right now? Money managers were turning bullish. The number of long hedge fund positions increased by 2 in recent months. Essent Group Ltd (NYSE:ESNT) was in 24 hedge funds' portfolios at the end of the third quarter of 2021. 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). There were 22 hedge funds in our database with ESNT positions at the end of the second quarter.

Billionaire Ken Griffin's Top 10 Stocks Holdings
Billionaire Ken Griffin's Top 10 Stocks Holdings

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we're going to take a gander at the latest hedge fund action surrounding Essent Group Ltd (NYSE:ESNT).

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

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ESNT over the last 25 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is ESNT A Good Stock To Buy?
Is ESNT A Good Stock To Buy?

Among these funds, Rima Senvest Management held the most valuable stake in Essent Group Ltd (NYSE:ESNT), which was worth $133.8 million at the end of the third quarter. On the second spot was Polar Capital which amassed $101 million worth of shares. Echo Street Capital Management, Citadel Investment Group, 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 Rima Senvest Management allocated the biggest weight to Essent Group Ltd (NYSE:ESNT), around 3.82% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 0.55 percent of its 13F equity portfolio to ESNT.

As one would reasonably expect, key money managers were leading the bulls' herd. TwinBeech Capital, managed by Jinghua Yan, initiated the largest position in Essent Group Ltd (NYSE:ESNT). TwinBeech Capital had $2.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $1.8 million investment in the stock during the quarter. The other funds with brand new ESNT positions are Greg Eisner's Engineers Gate Manager, Steve Cohen's Point72 Asset Management, and Peter Algert's Algert Global.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Essent Group Ltd (NYSE:ESNT) but similarly valued. We will take a look at Tenable Holdings, Inc. (NASDAQ:TENB), Alteryx, Inc. (NYSE:AYX), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Herbalife Nutrition Ltd. (NYSE:HLF), National Beverage Corp. (NASDAQ:FIZZ), Pan American Silver Corp. (NASDAQ:PAAS), and PowerSchool Holdings Inc. (NYSE:PWSC). This group of stocks' market values match ESNT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TENB,29,775447,-4 AYX,37,856548,4 MLCO,27,469516,-2 HLF,38,1809059,-2 FIZZ,17,281959,-4 PAAS,22,251670,-2 PWSC,11,2277988,11 Average,25.9,960312,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $960 million. That figure was $313 million in ESNT's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand PowerSchool Holdings Inc. (NYSE:PWSC) is the least popular one with only 11 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 51.1. 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. This is a slightly negative signal and 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately ESNT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ESNT investors were disappointed as the stock returned 0% since the end of September (through 12/9) 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 most of these stocks already outperformed the market in 2021.

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