"Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on ePlus Inc. (NASDAQ:PLUS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
ePlus Inc. (NASDAQ:PLUS) investors should be aware of an increase in enthusiasm from smart money of late. PLUS was in 13 hedge funds' portfolios at the end of December. There were 10 hedge funds in our database with PLUS positions at the end of the previous quarter. Our calculations also showed that PLUS isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to analyze the key hedge fund action regarding ePlus Inc. (NASDAQ:PLUS).
What does the smart money think about ePlus Inc. (NASDAQ:PLUS)?
At Q4's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PLUS over the last 14 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of ePlus Inc. (NASDAQ:PLUS), with a stake worth $8.4 million reported as of the end of December. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $6 million. Renaissance Technologies, Royce & Associates, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in ePlus Inc. (NASDAQ:PLUS). Marshall Wace LLP had $0.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.8 million investment in the stock during the quarter. The other funds with brand new PLUS positions are Benjamin A. Smith's Laurion Capital Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as ePlus Inc. (NASDAQ:PLUS) but similarly valued. These stocks are Baytex Energy Corp (NYSE:BTE), First Bancorp (NASDAQ:FBNC), Party City Holdco Inc (NYSE:PRTY), and Archrock, Inc. (NYSE:AROC). This group of stocks' market values are similar to PLUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BTE,12,52663,-9 FBNC,16,94672,0 PRTY,18,113628,0 AROC,20,41350,5 Average,16.5,75578,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $25 million in PLUS's case. Archrock, Inc. (NYSE:AROC) is the most popular stock in this table. On the other hand Baytex Energy Corp (NYSE:BTE) is the least popular one with only 12 bullish hedge fund positions. ePlus Inc. (NASDAQ:PLUS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on PLUS as the stock returned 27.6% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.