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Hedge Funds Have Never Been This Bullish On Evolent Health Inc (EVH)

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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Evolent Health Inc (NYSE:EVH).

Evolent Health Inc (NYSE:EVH) was in 33 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. EVH investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 24 hedge funds in our database with EVH holdings at the end of June. Our calculations also showed that EVH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Kris Jenner - Rock Springs Capital
Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to view the fresh hedge fund action surrounding Evolent Health Inc (NYSE:EVH).

Do Hedge Funds Think EVH Is A Good Stock To Buy Now?

At third quarter's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in EVH over the last 25 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is EVH A Good Stock To Buy?
Is EVH A Good Stock To Buy?

Among these funds, Engaged Capital held the most valuable stake in Evolent Health Inc (NYSE:EVH), which was worth $244.7 million at the end of the third quarter. On the second spot was Rock Springs Capital Management which amassed $58.1 million worth of shares. Greenhouse Funds, Sectoral Asset Management, and Park West Asset 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 Engaged Capital allocated the biggest weight to Evolent Health Inc (NYSE:EVH), around 17.58% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, setting aside 5.91 percent of its 13F equity portfolio to EVH.

Consequently, some big names have jumped into Evolent Health Inc (NYSE:EVH) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Evolent Health Inc (NYSE:EVH). Point72 Asset Management had $13.1 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann's TIG Advisors also initiated a $11.7 million position during the quarter. The following funds were also among the new EVH investors: Joseph Samuels's Islet Management, OrbiMed Advisors, and Efrem Kamen's Pura Vida Investments.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Evolent Health Inc (NYSE:EVH) but similarly valued. We will take a look at Mercury Systems Inc (NASDAQ:MRCY), Trinity Industries, Inc. (NYSE:TRN), Emergent Biosolutions Inc (NYSE:EBS), Flagstar Bancorp Inc (NYSE:FBC), Gentherm Inc (NASDAQ:THRM), Crescent Point Energy Corp (NYSE:CPG), and Lithium Americas Corp. (NYSE:LAC). This group of stocks' market values are closest to EVH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRCY,21,112589,10 TRN,17,649277,-3 EBS,16,82732,1 FBC,25,296204,0 THRM,18,165695,0 CPG,11,108975,-2 LAC,12,94159,3 Average,17.1,215662,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $540 million in EVH's case. Flagstar Bancorp Inc (NYSE:FBC) is the most popular stock in this table. On the other hand Crescent Point Energy Corp (NYSE:CPG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Evolent Health Inc (NYSE:EVH) is more popular among hedge funds. Our overall hedge fund sentiment score for EVH is 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately EVH wasn't nearly as popular as these 5 stocks and hedge funds that were betting on EVH were disappointed as the stock returned -16.1% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.