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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 Evergy, Inc. (NYSE:EVRG) to find out whether there were any major changes in hedge funds' views.
Is EVRG stock a buy? The smart money was selling. The number of bullish hedge fund bets were trimmed by 4 in recent months. Evergy, Inc. (NYSE:EVRG) was in 33 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 40. Our calculations also showed that EVRG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 37 hedge funds in our database with EVRG positions at the end of the third quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Singer of Elliott Management
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Do Hedge Funds Think EVRG Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EVRG over the last 22 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Evergy, Inc. (NYSE:EVRG) was held by Elliott Investment Management, which reported holding $585.2 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $270.6 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to Evergy, Inc. (NYSE:EVRG), around 13.31% of its 13F portfolio. Coann Capital is also relatively very bullish on the stock, earmarking 7.94 percent of its 13F equity portfolio to EVRG.
Judging by the fact that Evergy, Inc. (NYSE:EVRG) has faced falling interest from hedge fund managers, logic holds that there lies a certain "tier" of fund managers who sold off their full holdings heading into Q1. It's worth mentioning that Benjamin Pass's TOMS Capital said goodbye to the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at about $40.7 million in stock, and Carl Tiedemann and Michael Tiedemann's TIG Advisors was right behind this move, as the fund sold off about $23.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds heading into Q1.
Let's check out hedge fund activity in other stocks similar to Evergy, Inc. (NYSE:EVRG). We will take a look at Nuance Communications Inc. (NASDAQ:NUAN), Enel Americas S.A. (NYSE:ENIA), ASE Technology Holding Co., Ltd. (NYSE:ASX), Charles River Laboratories International Inc. (NYSE:CRL), ContextLogic Inc. (NASDAQ:WISH), Open Text Corporation (NASDAQ:OTEX), and W.P. Carey Inc. (NYSE:WPC). This group of stocks' market valuations resemble EVRG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUAN,60,4678042,15 ENIA,9,91500,-2 ASX,9,183415,-2 CRL,43,1187297,7 WISH,24,348110,23 OTEX,18,234136,-1 WPC,18,197829,-5 Average,25.9,988618,5 [/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 $989 million. That figure was $1404 million in EVRG's case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 9 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 49.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on EVRG as the stock returned 9% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.