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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded ePlus Inc. (NASDAQ:PLUS) based on those filings.
ePlus Inc. (NASDAQ:PLUS) shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. ePlus Inc. (NASDAQ:PLUS) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. There were 16 hedge funds in our database with PLUS positions at the end of the second quarter. Our calculations also showed that PLUS isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Chuck Royce of Royce & Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's view the new hedge fund action regarding ePlus Inc. (NASDAQ:PLUS).
Do Hedge Funds Think PLUS Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PLUS over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ePlus Inc. (NASDAQ:PLUS) was held by AltraVue Capital, which reported holding $9.2 million worth of stock at the end of September. It was followed by Royce & Associates with a $7.9 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to ePlus Inc. (NASDAQ:PLUS), around 5.37% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.89 percent of its 13F equity portfolio to PLUS.
Seeing as ePlus Inc. (NASDAQ:PLUS) has faced declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of hedgies who were dropping their full holdings heading into Q4. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $2.5 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund said goodbye to about $0.8 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as ePlus Inc. (NASDAQ:PLUS) but similarly valued. These stocks are StoneX Group Inc. (NASDAQ:SNEX), Tupperware Brands Corporation (NYSE:TUP), Eventbrite, Inc. (NYSE:EB), Nkarta, Inc. (NASDAQ:NKTX), KKR Real Estate Finance Trust Inc. (NYSE:KREF), Trinseo S.A. (NYSE:TSE), and Sally Beauty Holdings, Inc. (NYSE:SBH). All of these stocks' market caps match PLUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNEX,12,113710,-2 TUP,18,108740,5 EB,22,192534,2 NKTX,8,412618,8 KREF,6,8662,-2 TSE,13,31760,-5 SBH,27,134912,1 Average,15.1,143277,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $39 million in PLUS's case. Sally Beauty Holdings, Inc. (NYSE:SBH) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 6 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 overall hedge fund sentiment score for PLUS is 37.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on PLUS as the stock returned 20.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.