In this article we will check out the progression of hedge fund sentiment towards Ennis, Inc. (NYSE:EBF) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Ennis, Inc. (NYSE:EBF) was in 9 hedge funds' portfolios at the end of March. EBF shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. There were 11 hedge funds in our database with EBF holdings at the end of the previous quarter. Our calculations also showed that EBF isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
[caption id="attachment_26255" align="aligncenter" width="395"] Louis Navellier of Navellier & Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the recent hedge fund action regarding Ennis, Inc. (NYSE:EBF).
What have hedge funds been doing with Ennis, Inc. (NYSE:EBF)?
At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EBF over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the biggest position in Ennis, Inc. (NYSE:EBF). Renaissance Technologies has a $35.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $19 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain Cliff Asness's AQR Capital Management, David Harding's Winton Capital Management and Louis Navellier's Navellier & Associates. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Ennis, Inc. (NYSE:EBF), around 0.73% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.26 percent of its 13F equity portfolio to EBF.
Due to the fact that Ennis, Inc. (NYSE:EBF) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers who were dropping their positions entirely in the first quarter. Interestingly, Israel Englander's Millennium Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $0.8 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ennis, Inc. (NYSE:EBF) but similarly valued. We will take a look at Athersys, Inc. (NASDAQ:ATHX), Solar Capital Ltd. (NASDAQ:SLRC), ACCO Brands Corporation (NYSE:ACCO), and A10 Networks Inc (NYSE:ATEN). This group of stocks' market values resemble EBF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATHX,8,3683,1 SLRC,15,28444,-1 ACCO,18,26582,0 ATEN,19,110335,1 Average,15,42261,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $63 million in EBF's case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Athersys, Inc. (NASDAQ:ATHX) is the least popular one with only 8 bullish hedge fund positions. Ennis, Inc. (NYSE:EBF) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately EBF wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EBF investors were disappointed as the stock returned -5.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.