Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Euronet Worldwide, Inc. (NASDAQ:EEFT) from the perspective of those elite funds.
Euronet Worldwide, Inc. (NASDAQ:EEFT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds' portfolios at the end of June. At the end of this article we will also compare EEFT to other stocks including The Western Union Company (NYSE:WU), National Retail Properties, Inc. (NYSE:NNN), and OGE Energy Corp. (NYSE:OGE) to get a better sense of its popularity. Our calculations also showed that EEFT isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 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 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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a glance at the new hedge fund action encompassing Euronet Worldwide, Inc. (NASDAQ:EEFT).
What does smart money think about Euronet Worldwide, Inc. (NASDAQ:EEFT)?
At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EEFT over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Euronet Worldwide, Inc. (NASDAQ:EEFT). Arrowstreet Capital has a $71.9 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Principal Global Investors of Columbus Circle Investors, with a $47.9 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass John Overdeck and David Siegel's Two Sigma Advisors, George McCabe's Portolan Capital Management and Seymour Sy Kaufman and Michael Stark's Crosslink Capital.
Due to the fact that Euronet Worldwide, Inc. (NASDAQ:EEFT) has witnessed declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedgies that decided to sell off their entire stakes last quarter. Interestingly, Renaissance Technologies cut the biggest investment of the 750 funds followed by Insider Monkey, totaling about $38.7 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund sold off about $34.8 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Euronet Worldwide, Inc. (NASDAQ:EEFT). These stocks are The Western Union Company (NYSE:WU), National Retail Properties, Inc. (NYSE:NNN), OGE Energy Corp. (NYSE:OGE), and Westlake Chemical Corporation (NYSE:WLK). This group of stocks' market values resemble EEFT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WU,23,383896,3 NNN,16,217203,4 OGE,13,135934,-4 WLK,23,313524,-3 Average,18.75,262639,0 [/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 $263 million. That figure was $410 million in EEFT's case. The Western Union Company (NYSE:WU) is the most popular stock in this table. On the other hand OGE Energy Corp. (NYSE:OGE) is the least popular one with only 13 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EEFT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EEFT were disappointed as the stock returned -13% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.