Convergys Corporation (CVG): Hedge Funds and Insiders Are Bearish, What Should You Do?

Convergys Corporation (NYSE:CVG) was in 11 hedge funds’ portfolio at the end of the first quarter of 2013. CVG investors should pay attention to a decrease in hedge fund sentiment in recent months. There were 13 hedge funds in our database with CVG positions at the end of the previous quarter.

According to most shareholders, hedge funds are seen as worthless, old financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, we choose to focus on the masters of this club, close to 450 funds. It is estimated that this group has its hands on the lion’s share of the hedge fund industry’s total asset base, and by tracking their best picks, we have figured out a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as key, bullish insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are a number of stimuli for an insider to cut shares of his or her company, but only one, very clear reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this method if piggybackers understand where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the latest action surrounding Convergys Corporation (NYSE:CVG).

How have hedgies been trading Convergys Corporation (NYSE:CVG)?

At Q1’s end, a total of 11 of the hedge funds we track were long in this stock, a change of -15% from one quarter earlier. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the largest position in Convergys Corporation (NYSE:CVG), worth close to $109.3 million, comprising 0.3% of its total 13F portfolio. Coming in second is Amy Minella of Cardinal Capital, with a $48 million position; the fund has 3% of its 13F portfolio invested in the stock. Other hedgies with similar optimism include Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Barry Rosenstein’s JANA Partners.

Because Convergys Corporation (NYSE:CVG) has witnessed a declination in interest from the smart money, logic holds that there is a sect of fund managers that slashed their full holdings in Q1. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management sold off the biggest stake of the 450+ funds we track, worth about $2.6 million in stock., and Matthew Hulsizer of PEAK6 Capital Management was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds in Q1.

Insider trading activity in Convergys Corporation (NYSE:CVG)

Bullish insider trading is most useful when the company in focus has experienced transactions within the past six months. Over the latest half-year time period, Convergys Corporation (NYSE:CVG) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Convergys Corporation (NYSE:CVG). These stocks are SS and C Technologies Holdings Inc (NASDAQ:SSNC), Qlik Technologies Inc (NASDAQ:QLIK), Guidewire Software Inc (NYSE:GWRE), Sapient Corporation (NASDAQ:SAPE), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks belong to the business software & services industry and their market caps resemble CVG’s market cap.

With the returns demonstrated by Insider Monkey’s strategies, retail investors must always pay attention to hedge fund and insider trading sentiment, and Convergys Corporation (NYSE:CVG) shareholders fit into this picture quite nicely.

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