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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Evertec Inc (NYSE:EVTC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Evertec Inc (NYSE:EVTC) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that EVTC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most market participants, hedge funds are perceived as unimportant, outdated financial vehicles of years past. While there are over 8000 funds with their doors open today, Our experts choose to focus on the masters of this club, about 850 funds. These money managers shepherd the lion's share of the smart money's total capital, and by tailing their first-class equity investments, Insider Monkey has determined various investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a look at the recent hedge fund action surrounding Evertec Inc (NYSE:EVTC).
Hedge fund activity in Evertec Inc (NYSE:EVTC)
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in EVTC a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Rivulet Capital held the most valuable stake in Evertec Inc (NYSE:EVTC), which was worth $89.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $79.8 million worth of shares. GLG Partners, Arrowstreet Capital, 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 Rivulet Capital allocated the biggest weight to Evertec Inc (NYSE:EVTC), around 7.92% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, earmarking 0.13 percent of its 13F equity portfolio to EVTC.
Due to the fact that Evertec Inc (NYSE:EVTC) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedgies that elected to cut their positions entirely by the end of the third quarter. It's worth mentioning that Ed Bosek's BeaconLight Capital sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising close to $9.8 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund dumped about $4.1 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Evertec Inc (NYSE:EVTC) but similarly valued. These stocks are Yelp Inc (NYSE:YELP), Columbia Property Trust Inc (NYSE:CXP), Acushnet Holdings Corp. (NYSE:GOLF), and United Community Banks Inc (NASDAQ:UCBI). All of these stocks' market caps are closest to EVTC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YELP,27,360550,-2 CXP,22,123416,7 GOLF,16,22328,3 UCBI,16,56723,3 Average,20.25,140754,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $271 million in EVTC's case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 16 bullish hedge fund positions. Evertec Inc (NYSE:EVTC) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately EVTC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EVTC investors were disappointed as the stock returned -34.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.