Aspen Technology, Inc. (AZPN) Fell Out Of Favor With Hedge Funds

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Aspen Technology, Inc. (NASDAQ:AZPN).

Is Aspen Technology, Inc. (NASDAQ:AZPN) a healthy stock for your portfolio? Prominent investors were in a pessimistic mood. The number of bullish hedge fund positions retreated by 9 lately. Aspen Technology, Inc. (NASDAQ:AZPN) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that AZPN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Alec Litowitz of Magnetar Capital

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. Keeping this in mind let’s analyze the recent hedge fund action regarding Aspen Technology, Inc. (NASDAQ:AZPN).

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

At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the first quarter of 2020. By comparison, 28 hedge funds held shares or bullish call options in AZPN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, 40 North Management, managed by David S. Winter and David J. Millstone, holds the biggest position in Aspen Technology, Inc. (NASDAQ:AZPN). 40 North Management has a $256.5 million position in the stock, comprising 5.9% of its 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $122.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Panayotis Takis Sparaggis’s Alkeon Capital Management, Ryan Pedlow’s Two Creeks Capital Management and Tim Hurd and Ed Magnus’s BlueSpruce Investments. In terms of the portfolio weights assigned to each position 40 North Management allocated the biggest weight to Aspen Technology, Inc. (NASDAQ:AZPN), around 5.94% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, designating 4.4 percent of its 13F equity portfolio to AZPN.

Judging by the fact that Aspen Technology, Inc. (NASDAQ:AZPN) has witnessed a decline in interest from the smart money, logic holds that there exists a select few fund managers who were dropping their positions entirely by the end of the second quarter. Intriguingly, Dev Kantesaria’s Valley Forge Capital dropped the largest investment of all the hedgies watched by Insider Monkey, valued at close to $55.9 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also said goodbye to its stock, about $19.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Aspen Technology, Inc. (NASDAQ:AZPN). We will take a look at Store Capital Corporation (NYSE:STOR), CubeSmart (NYSE:CUBE), Alleghany Corporation (NYSE:Y), AECOM (NYSE:ACM), AptarGroup, Inc. (NYSE:ATR), Pinnacle West Capital Corporation (NYSE:PNW), and Dun & Bradstreet Holdings, Inc. (NYSE:DNB). This group of stocks’ market valuations resemble AZPN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $666 million in AZPN’s case. Dun & Bradstreet Holdings, Inc. (NYSE:DNB) is the most popular stock in this table. On the other hand Store Capital Corporation (NYSE:STOR) is the least popular one with only 13 bullish hedge fund positions. Aspen Technology, Inc. (NASDAQ:AZPN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AZPN is 30.3. 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 gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on AZPN as the stock returned 14.1% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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