At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ePlus Inc. (NASDAQ:PLUS) at the end of the first quarter and determine whether the smart money was really smart about this stock.
ePlus Inc. (NASDAQ:PLUS) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as MaxLinear, Inc. (NYSE:MXL), Community Healthcare Trust Inc (NYSE:CHCT), and Armada Hoffler Properties Inc (NYSE:AHH) to gather more data points. Our calculations also showed that PLUS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are seen as underperforming, outdated financial tools of years past. While there are over 8000 funds with their doors open today, We hone in on the bigwigs of this group, approximately 850 funds. These investment experts handle most of all hedge funds' total asset base, and by observing their matchless equity investments, Insider Monkey has formulated many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_258236" align="aligncenter" width="392"] Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 largest lithium producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the key hedge fund action encompassing ePlus Inc. (NASDAQ:PLUS).
How have hedgies been trading ePlus Inc. (NASDAQ:PLUS)?
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PLUS over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in ePlus Inc. (NASDAQ:PLUS), which was worth $7.1 million at the end of the third quarter. On the second spot was D E Shaw which amassed $6.8 million worth of shares. AQR Capital Management, Algert Coldiron Investors, and Marshall Wace LLP 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 Algert Coldiron Investors allocated the biggest weight to ePlus Inc. (NASDAQ:PLUS), around 1.02% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to PLUS.
Since ePlus Inc. (NASDAQ:PLUS) has faced bearish sentiment from the smart money, it's safe to say that there were a few funds who sold off their positions entirely last quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp dumped the largest position of the "upper crust" of funds monitored by Insider Monkey, valued at about $0.6 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are intriguing to say the least, 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 - not necessarily in the same industry as ePlus Inc. (NASDAQ:PLUS) but similarly valued. We will take a look at MaxLinear, Inc. (NYSE:MXL), Community Healthcare Trust Inc (NYSE:CHCT), Armada Hoffler Properties Inc (NYSE:AHH), and 1st Source Corporation (NASDAQ:SRCE). All of these stocks' market caps are closest to PLUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MXL,13,28040,-4 CHCT,12,86149,-2 AHH,9,52378,3 SRCE,9,26778,-1 Average,10.75,48336,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $31 million in PLUS's case. MaxLinear, Inc. (NYSE:MXL) is the most popular stock in this table. On the other hand Armada Hoffler Properties Inc (NYSE:AHH) is the least popular one with only 9 bullish hedge fund positions. ePlus Inc. (NASDAQ:PLUS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately PLUS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PLUS were disappointed as the stock returned 9.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.