We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Edgewell Personal Care Company (NYSE:EPC) and determine whether hedge funds skillfully traded this stock.
Is Edgewell Personal Care Company (NYSE:EPC) a good stock to buy now? Investors who are in the know were selling. The number of bullish hedge fund bets were trimmed by 5 lately. Edgewell Personal Care Company (NYSE:EPC) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. Our calculations also showed that EPC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
If you’d ask most traders, hedge funds are viewed as worthless, old financial vehicles of the past. While there are more than 8000 funds trading at the moment, We choose to focus on the top tier of this group, approximately 850 funds. It is estimated that this group of investors control bulk of the hedge fund industry’s total asset base, and by tracking their finest stock picks, Insider Monkey has discovered many investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s take a look at the new hedge fund action surrounding Edgewell Personal Care Company (NYSE:EPC).
What have hedge funds been doing with Edgewell Personal Care Company (NYSE:EPC)?
Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in EPC a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Edgewell Personal Care Company (NYSE:EPC) was held by GAMCO Investors, which reported holding $64.9 million worth of stock at the end of September. It was followed by Tremblant Capital with a $41.4 million position. Other investors bullish on the company included Arrowstreet Capital, Armistice Capital, and Atlantic Investment Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Edgewell Personal Care Company (NYSE:EPC), around 6.58% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, dishing out 2.98 percent of its 13F equity portfolio to EPC.
Due to the fact that Edgewell Personal Care Company (NYSE:EPC) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that slashed their full holdings in the second quarter. It’s worth mentioning that Jack Woodruff’s Candlestick Capital Management dropped the largest investment of all the hedgies tracked by Insider Monkey, worth close to $12.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $4.4 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds in the second quarter.
Let’s also examine 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 Fluor Corporation (NYSE:FLR), Korn Ferry (NYSE:KFY), Heartland Express, Inc. (NASDAQ:HTLD), Phoenix Tree Holdings Limited (NYSE:DNK), BMC Stock Holdings, Inc. (NASDAQ:BMCH), Jack in the Box Inc. (NASDAQ:JACK), and Adverum Biotechnologies, Inc. (NASDAQ:ADVM). This group of stocks’ market caps are closest to EPC’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLR,20,102139,-4 KFY,28,167753,8 HTLD,13,46345,2 DNK,3,22665,0 BMCH,26,307670,3 JACK,31,291611,3 ADVM,25,702737,0 Average,20.9,234417,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $209 million in EPC’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Phoenix Tree Holdings Limited (NYSE:DNK) is the least popular one with only 3 bullish hedge fund positions. Edgewell Personal Care Company (NYSE:EPC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EPC is 46.6. 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. This is a slightly negative signal and 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately EPC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EPC investors were disappointed as the stock returned -10.5% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.