Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Elevate Credit, Inc. (NYSE:ELVT) investors should pay attention to an increase in hedge fund sentiment recently. ELVT was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 7 hedge funds in our database with ELVT positions at the end of the previous quarter. Our calculations also showed that ELVT isn't among the 30 most popular stocks among hedge funds.
In the eyes of most market participants, hedge funds are perceived as underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading today, Our experts look at the crème de la crème of this group, approximately 750 funds. These money managers command the majority of the smart money's total asset base, and by keeping an eye on their highest performing picks, Insider Monkey has found many investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We're going to check out the key hedge fund action encompassing Elevate Credit, Inc. (NYSE:ELVT).
What does smart money think about Elevate Credit, Inc. (NYSE:ELVT)?
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ELVT over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Prescott Group Capital Management held the most valuable stake in Elevate Credit, Inc. (NYSE:ELVT), which was worth $7.6 million at the end of the first quarter. On the second spot was Nantahala Capital Management which amassed $6.8 million worth of shares. Moreover, Renaissance Technologies, Hawk Ridge Management, and 683 Capital Partners were also bullish on Elevate Credit, Inc. (NYSE:ELVT), allocating a large percentage of their portfolios to this stock.
Now, some big names have jumped into Elevate Credit, Inc. (NYSE:ELVT) headfirst. Millennium Management, managed by Israel Englander, initiated the most outsized position in Elevate Credit, Inc. (NYSE:ELVT). Millennium Management had $0.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $0.1 million position during the quarter. The following funds were also among the new ELVT investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Elevate Credit, Inc. (NYSE:ELVT) but similarly valued. These stocks are Northeast Bank (NASDAQ:NBN), Pingtan Marine Enterprise Ltd. (NASDAQ:PME), Flotek Industries Inc (NYSE:FTK), and EverQuote, Inc. (NASDAQ:EVER). All of these stocks' market caps are closest to ELVT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NBN,5,24875,0 PME,1,33,0 FTK,10,26533,1 EVER,10,10994,3 Average,6.5,15609,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $22 million in ELVT's case. Flotek Industries Inc (NYSE:FTK) is the most popular stock in this table. On the other hand Pingtan Marine Enterprise Ltd. (NASDAQ:PME) is the least popular one with only 1 bullish hedge fund positions. Elevate Credit, Inc. (NYSE:ELVT) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ELVT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ELVT were disappointed as the stock returned 3.5% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.