Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Everbridge, Inc. (NASDAQ:EVBG) a buy right now? Hedge funds are taking a bullish view. The number of bullish hedge fund positions inched up by 8 recently. Our calculations also showed that EVBG isn't among the 30 most popular stocks among hedge funds. EVBG was in 30 hedge funds' portfolios at the end of March. There were 22 hedge funds in our database with EVBG holdings at the end of the previous quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the recent hedge fund action surrounding Everbridge, Inc. (NASDAQ:EVBG).
Hedge fund activity in Everbridge, Inc. (NASDAQ:EVBG)
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in EVBG a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Everbridge, Inc. (NASDAQ:EVBG) was held by Alkeon Capital Management, which reported holding $68.1 million worth of stock at the end of March. It was followed by Light Street Capital with a $65.2 million position. Other investors bullish on the company included Polar Capital, Driehaus Capital, and Select Equity Group.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Sylebra Capital Management, managed by Daniel Patrick Gibson, established the most valuable position in Everbridge, Inc. (NASDAQ:EVBG). Sylebra Capital Management had $17.5 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $9.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Joe DiMenna's ZWEIG DIMENNA PARTNERS, Ken Griffin's Citadel Investment Group, and David Costen Haley's HBK Investments.
Let's now review hedge fund activity in other stocks similar to Everbridge, Inc. (NASDAQ:EVBG). These stocks are SITE Centers Corp. (NYSE:SITC), National Vision Holdings, Inc. (NASDAQ:EYE), RPC, Inc. (NYSE:RES), and Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA). This group of stocks' market caps resemble EVBG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SITC,14,64956,-1 EYE,16,395351,1 RES,20,138878,8 LEXEA,29,390781,3 Average,19.75,247492,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $421 million in EVBG's case. Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is the most popular stock in this table. On the other hand SITE Centers Corp. (NYSE:SITC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Everbridge, Inc. (NASDAQ:EVBG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on EVBG as the stock returned 7.2% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.