The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought The Ensign Group, Inc. (NASDAQ:ENSG) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
The Ensign Group, Inc. (NASDAQ:ENSG) has seen an increase in enthusiasm from smart money in recent months. The Ensign Group, Inc. (NASDAQ:ENSG) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ENSG isn't among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.
Kamran Moghtaderi of Eversept Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's analyze the latest hedge fund action regarding The Ensign Group, Inc. (NASDAQ:ENSG).
What have hedge funds been doing with The Ensign Group, Inc. (NASDAQ:ENSG)?
At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in ENSG 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.
Among these funds, Eversept Partners held the most valuable stake in The Ensign Group, Inc. (NASDAQ:ENSG), which was worth $17.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $10.4 million worth of shares. Royce & Associates, Millennium Management, and Winton Capital Management 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 Eversept Partners allocated the biggest weight to The Ensign Group, Inc. (NASDAQ:ENSG), around 2.89% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to ENSG.
Now, some big names have jumped into The Ensign Group, Inc. (NASDAQ:ENSG) headfirst. Renaissance Technologies, assembled the largest position in The Ensign Group, Inc. (NASDAQ:ENSG). Renaissance Technologies had $2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $1 million position during the quarter. The other funds with brand new ENSG positions are Donald Sussman's Paloma Partners, Greg Eisner's Engineers Gate Manager, and Jerome Pfund and Michael Sjostrom's Sectoral Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Ensign Group, Inc. (NASDAQ:ENSG) but similarly valued. These stocks are Winnebago Industries, Inc. (NYSE:WGO), Harmony Gold Mining Company Limited (NYSE:HMY), First Hawaiian, Inc. (NASDAQ:FHB), CNO Financial Group Inc (NYSE:CNO), Acadia Healthcare Company Inc (NASDAQ:ACHC), FormFactor, Inc. (NASDAQ:FORM), and IGM Biosciences, Inc. (NASDAQ:IGMS). All of these stocks' market caps are similar to ENSG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WGO,33,365601,14 HMY,10,85944,1 FHB,21,147277,0 CNO,18,287275,3 ACHC,23,381810,-1 FORM,23,113808,1 IGMS,16,679671,2 Average,20.6,294484,2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $61 million in ENSG's case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 10 bullish hedge fund positions. The Ensign Group, Inc. (NASDAQ:ENSG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ENSG is 55.6. 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 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on ENSG as the stock returned 36.5% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.