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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Evergy, Inc. (NYSE:EVRG)? The smart money sentiment can provide an answer to this question.
Is EVRG a good stock to buy? Evergy, Inc. (NYSE:EVRG) investors should pay attention to a decrease in hedge fund sentiment lately. Evergy, Inc. (NYSE:EVRG) was in 37 hedge funds' portfolios at the end of September. The all time high for this statistic is 40. There were 40 hedge funds in our database with EVRG positions at the end of the second quarter. Our calculations also showed that EVRG 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Zilvinas Mecelis of Covalis Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let's take a look at the fresh hedge fund action regarding Evergy, Inc. (NYSE:EVRG).
Do Hedge Funds Think EVRG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in EVRG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Evergy, Inc. (NYSE:EVRG), which was worth $174.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $146.3 million worth of shares. Renaissance Technologies, Millennium Management, and Covalis Capital 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 Covalis Capital allocated the biggest weight to Evergy, Inc. (NYSE:EVRG), around 20.04% of its 13F portfolio. TOMS Capital is also relatively very bullish on the stock, earmarking 6.08 percent of its 13F equity portfolio to EVRG.
Due to the fact that Evergy, Inc. (NYSE:EVRG) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of funds who were dropping their positions entirely last quarter. At the top of the heap, Dan Loeb's Third Point dropped the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $88.9 million in stock, and Joseph Samuels's Islet Management was right behind this move, as the fund dropped about $17.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Evergy, Inc. (NYSE:EVRG) but similarly valued. We will take a look at Open Text Corporation (NASDAQ:OTEX), Whirlpool Corporation (NYSE:WHR), Teledyne Technologies Incorporated (NYSE:TDY), Booz Allen Hamilton Holding Corporation (NYSE:BAH), Autohome Inc (NYSE:ATHM), Natura &Co Holding S.A. (NYSE:NTCO), and The Liberty SiriusXM Group (NASDAQ:LSXMA). This group of stocks' market caps match EVRG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OTEX,19,160355,1 WHR,28,1212823,2 TDY,31,343280,-3 BAH,31,266718,6 ATHM,17,909095,-7 NTCO,4,98196,-1 LSXMA,42,1294451,-4 Average,24.6,612131,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $612 million. That figure was $763 million in EVRG's case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Evergy, Inc. (NYSE:EVRG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EVRG is 73.2. 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 positive signal but 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately EVRG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EVRG were disappointed as the stock returned 6% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.