Is Evertec Inc (EVTC) Going to Burn These Hedge Funds?

·6 min read

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Evertec Inc (NYSE:EVTC).

Evertec Inc (NYSE:EVTC) investors should be aware of a decrease in activity from the world's largest hedge funds of late. Evertec Inc (NYSE:EVTC) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 26. Our calculations also showed that EVTC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are assumed to be underperforming, old investment tools of the past. While there are over 8000 funds in operation at present, Our researchers choose to focus on the upper echelon of this group, around 850 funds. Most estimates calculate that this group of people handle bulk of all hedge funds' total asset base, and by paying attention to their best investments, Insider Monkey has unsheathed many investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's review the latest hedge fund action regarding Evertec Inc (NYSE:EVTC).

Do Hedge Funds Think EVTC Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in EVTC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Rivulet Capital held the most valuable stake in Evertec Inc (NYSE:EVTC), which was worth $66.8 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $58.9 million worth of shares. Arrowstreet Capital, Royce & Associates, and GLG Partners 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 Rivulet Capital allocated the biggest weight to Evertec Inc (NYSE:EVTC), around 3.79% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, setting aside 1.02 percent of its 13F equity portfolio to EVTC.

Due to the fact that Evertec Inc (NYSE:EVTC) has faced a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of money managers who sold off their positions entirely heading into Q3. At the top of the heap, Allon Hellmann's Full18 Capital said goodbye to the biggest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $0.9 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund cut about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q3.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Evertec Inc (NYSE:EVTC) but similarly valued. We will take a look at SelectQuote, Inc. (NYSE:SLQT), Corporate Office Properties Trust (NYSE:OFC), Worthington Industries, Inc. (NYSE:WOR), FirstCash, Inc. (NASDAQ:FCFS), Cathay General Bancorp (NASDAQ:CATY), GATX Corporation (NYSE:GATX), and EnLink Midstream LLC (NYSE:ENLC). All of these stocks' market caps are closest to EVTC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLQT,19,140453,2 OFC,13,79567,-6 WOR,15,52633,1 FCFS,17,118556,4 CATY,13,110863,1 GATX,17,216634,1 ENLC,10,46473,-1 Average,14.9,109311,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $230 million in EVTC's case. SelectQuote, Inc. (NYSE:SLQT) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Evertec Inc (NYSE:EVTC) is more popular among hedge funds. Our overall hedge fund sentiment score for EVTC is 77.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on EVTC as the stock returned 7.1% since the end of June (through 10/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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