As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Euronet Worldwide, Inc. (NASDAQ:EEFT).
Euronet Worldwide, Inc. (NASDAQ:EEFT) investors should pay attention to an increase in enthusiasm from smart money of late. EEFT was in 35 hedge funds' portfolios at the end of the third quarter of 2019. There were 33 hedge funds in our database with EEFT holdings 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 Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_745225" align="aligncenter" width="1613"] Noam Gottesman of GLG Partners[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the new hedge fund action surrounding Euronet Worldwide, Inc. (NASDAQ:EEFT).
Hedge fund activity in Euronet Worldwide, Inc. (NASDAQ:EEFT)
Heading into the fourth quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EEFT over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Euronet Worldwide, Inc. (NASDAQ:EEFT), which was worth $53.8 million at the end of the third quarter. On the second spot was GLG Partners which amassed $27.9 million worth of shares. Columbus Circle Investors, Crosslink Capital, and Portolan 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 Crosslink Capital allocated the biggest weight to Euronet Worldwide, Inc. (NASDAQ:EEFT), around 6.05% of its portfolio. Lucha Capital Management is also relatively very bullish on the stock, dishing out 3.49 percent of its 13F equity portfolio to EEFT.
As industrywide interest jumped, key hedge funds have jumped into Euronet Worldwide, Inc. (NASDAQ:EEFT) headfirst. Soros Fund Management, managed by George Soros, created the most outsized position in Euronet Worldwide, Inc. (NASDAQ:EEFT). Soros Fund Management had $10.5 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $10.2 million position during the quarter. The other funds with brand new EEFT positions are Daniel S. Och (founder)'s Sculptor Capital, Renaissance Technologies, and Louis Navellier's Navellier & Associates.
Let's check out hedge fund activity in other stocks similar to Euronet Worldwide, Inc. (NASDAQ:EEFT). These stocks are Invesco Ltd. (NYSE:IVZ), Canopy Growth Corporation (NYSE:CGC), Ares Capital Corporation (NASDAQ:ARCC), and Coty Inc (NYSE:COTY). This group of stocks' market values are closest to EEFT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IVZ,24,198236,4 CGC,8,23222,4 ARCC,21,225163,-2 COTY,22,138577,3 Average,18.75,146300,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $323 million in EEFT's case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Euronet Worldwide, Inc. (NASDAQ:EEFT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on EEFT, though not to the same extent, as the stock returned 7.4% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.