In this article we will check out the progression of hedge fund sentiment towards Euronet Worldwide, Inc. (NASDAQ:EEFT) 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.
Euronet Worldwide, Inc. (NASDAQ:EEFT) investors should be aware of a decrease in enthusiasm from smart money of late. EEFT was in 30 hedge funds' portfolios at the end of March. There were 47 hedge funds in our database with EEFT positions at the end of the previous quarter. Our calculations also showed that EEFT 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_758500" align="aligncenter" width="400"] Daniel Gold of QVT Financial[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to analyze the latest hedge fund action surrounding Euronet Worldwide, Inc. (NASDAQ:EEFT).
What have hedge funds been doing with Euronet Worldwide, Inc. (NASDAQ:EEFT)?
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in EEFT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Euronet Worldwide, Inc. (NASDAQ:EEFT) was held by Citadel Investment Group, which reported holding $63.4 million worth of stock at the end of September. It was followed by Steamboat Capital Partners with a $29.4 million position. Other investors bullish on the company included Renaissance Technologies, QVT Financial, and Crosslink Capital. In terms of the portfolio weights assigned to each position Steamboat Capital Partners allocated the biggest weight to Euronet Worldwide, Inc. (NASDAQ:EEFT), around 5.78% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, earmarking 4.45 percent of its 13F equity portfolio to EEFT.
Seeing as Euronet Worldwide, Inc. (NASDAQ:EEFT) has faced declining sentiment from the smart money, logic holds that there was a specific group of hedgies who were dropping their entire stakes by the end of the first quarter. At the top of the heap, George McCabe's Portolan Capital Management dumped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $26 million in stock. Joe Milano's fund, Greenhouse Funds, also said goodbye to its stock, about $14.9 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 17 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Euronet Worldwide, Inc. (NASDAQ:EEFT) but similarly valued. We will take a look at Enel Chile S.A. (NYSE:ENIC), Forty Seven, Inc. (NASDAQ:FTSV), Sensata Technologies Holding plc (NYSE:ST), and Prosperity Bancshares, Inc. (NYSE:PB). This group of stocks' market valuations are similar to EEFT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENIC,8,17690,2 FTSV,40,1084502,22 ST,26,699556,3 PB,16,81448,-6 Average,22.5,470799,5.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $240 million in EEFT's case. Forty Seven, Inc. (NASDAQ:FTSV) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 8 bullish hedge fund positions. Euronet Worldwide, Inc. (NASDAQ:EEFT) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately EEFT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on EEFT were disappointed as the stock returned 10.5% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.