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Were Hedge Funds Right About Flocking Into Edgewell Personal Care Company (EPC)?

Nina Todic

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Edgewell Personal Care Company (NYSE:EPC).

Edgewell Personal Care Company (NYSE:EPC) shareholders have witnessed an increase in support from the world's most elite money managers lately. Our calculations also showed that EPC isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

GAMCO Investors, Mario Gabelli

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 surrounding Edgewell Personal Care Company (NYSE:EPC).

How are hedge funds trading Edgewell Personal Care Company (NYSE:EPC)?

Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in EPC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with EPC Positions

Among these funds, GAMCO Investors held the most valuable stake in Edgewell Personal Care Company (NYSE:EPC), which was worth $55.9 million at the end of the second quarter. On the second spot was Armistice Capital which amassed $41.5 million worth of shares. Moreover, Citadel Investment Group, Soros Fund Management, and Arrowstreet Capital were also bullish on Edgewell Personal Care Company (NYSE:EPC), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds have jumped into Edgewell Personal Care Company (NYSE:EPC) headfirst. Soros Fund Management, managed by George Soros, established the most outsized position in Edgewell Personal Care Company (NYSE:EPC). Soros Fund Management had $21.6 million invested in the company at the end of the quarter. Brett Barakett's Tremblant Capital also made a $8.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Davidson and Joseph Jacobs's Wexford Capital, Matthew Hulsizer's PEAK6 Capital Management, and Paul Tudor Jones's Tudor Investment Corp.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Edgewell Personal Care Company (NYSE:EPC) but similarly valued. We will take a look at AnaptysBio, Inc. (NASDAQ:ANAB), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), Opko Health Inc. (NASDAQ:OPK), and Arcos Dorados Holdings Inc. (NYSE:ARCO). This group of stocks' market caps are similar to EPC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANAB,16,547980,-4 CCO,32,453766,21 OPK,14,13007,1 ARCO,14,123488,-4 Average,19,284560,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $216 million in EPC's case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Opko Health Inc. (NASDAQ:OPK) is the least popular one with only 14 bullish hedge fund positions. Edgewell Personal Care Company (NYSE:EPC) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on EPC as the stock returned 20.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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