We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Enact Holdings Inc. (NASDAQ:ACT).
Enact Holdings Inc. (NASDAQ:ACT) investors should pay attention to an increase in hedge fund interest in recent months. Enact Holdings Inc. (NASDAQ:ACT) was in 22 hedge funds' portfolios at the end of the third quarter of 2021. There were 0 hedge funds in our database with ACT positions at the end of the second quarter. Our calculations also showed that ACT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we're going to take a look at the key hedge fund action regarding Enact Holdings Inc. (NASDAQ:ACT).
Frank Brosens of Taconic Capital
Do Hedge Funds Think ACT Is A Good Stock To Buy Now?
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ACT over the last 25 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Taconic Capital held the most valuable stake in Enact Holdings Inc. (NASDAQ:ACT) , which was worth $32.9 million at the end of the third quarter. On the second spot was Redwood Capital Management which amassed $32.9 million worth of shares. Glendon Capital Management, EJF Capital, and Millennium Management 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 Redwood Capital Management allocated the biggest weight to Enact Holdings Inc. (NASDAQ:ACT) , around 2.53% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, designating 2.29 percent of its 13F equity portfolio to ACT.
Now, key hedge funds were leading the bulls' herd. Taconic Capital, managed by Frank Brosens, initiated the most valuable position in Enact Holdings Inc. (NASDAQ:ACT) . Taconic Capital had $32.9 million invested in the company at the end of the quarter. Jonathan Kolatch's Redwood Capital Management also initiated a $32.9 million position during the quarter. The following funds were also among the new ACT investors: Matthew Barrett's Glendon Capital Management, Emanuel J. Friedman's EJF Capital, and Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks similar to Enact Holdings Inc. (NASDAQ:ACT) . We will take a look at Macquarie Infrastructure Holdings, LLC (NYSE:MIC), Academy Sports and Outdoors, Inc. (NASDAQ:ASO), Onto Innovation Inc. (NYSE:ONTO), The Macerich Company (NYSE:MAC), Dillard's, Inc. (NYSE:DDS), LXP Industrial Trust (NYSE:LXP), and Lyell Immunopharma Inc. (NASDAQ:LYEL). This group of stocks' market valuations resemble ACT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIC,23,542327,-11 ASO,48,1213061,3 ONTO,21,270140,-4 MAC,10,99441,0 DDS,22,120218,4 LXP,15,251370,-1 LYEL,10,118788,10 Average,21.3,373621,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $174 million in ACT's case. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is the most popular stock in this table. On the other hand The Macerich Company (NYSE:MAC) is the least popular one with only 10 bullish hedge fund positions. Enact Holdings Inc. (NASDAQ:ACT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACT is 55.8. 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. 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 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 gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately ACT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ACT were disappointed as the stock returned -0.4% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.