The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Conduent Incorporated (NYSE:CNDT), and what that likely means for the prospects of the company and its stock.
Is Conduent Incorporated (NYSE:CNDT) worth your attention right now? Money managers are taking a bearish view. The number of long hedge fund bets decreased by 3 recently. Our calculations also showed that CNDT isn’t among the 30 most popular stocks among hedge funds (view the video below). CNDT was in 27 hedge funds’ portfolios at the end of June. There were 30 hedge funds in our database with CNDT holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action regarding Conduent Incorporated (NYSE:CNDT).
What does smart money think about Conduent Incorporated (NYSE:CNDT)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in CNDT 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.
The largest stake in Conduent Incorporated (NYSE:CNDT) was held by Icahn Capital LP, which reported holding $303.4 million worth of stock at the end of March. It was followed by Iridian Asset Management with a $94.5 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Rubric Capital Management.
Seeing as Conduent Incorporated (NYSE:CNDT) has faced falling interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that slashed their entire stakes heading into Q3. Interestingly, Isaac Corre’s Governors Lane sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $20.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $19.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks similar to Conduent Incorporated (NYSE:CNDT). We will take a look at Kinsale Capital Group, Inc. (NASDAQ:KNSL), Northwest Natural Holding Company (NYSE:NWN), LegacyTexas Financial Group Inc (NASDAQ:LTXB), and NetScout Systems, Inc. (NASDAQ:NTCT). This group of stocks’ market caps are similar to CNDT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KNSL | 9 | 34088 | 0 |
| NWN | 12 | 80588 | 1 |
| LTXB | 15 | 67499 | 3 |
| NTCT | 14 | 118278 | 2 |
| Average | 12.5 | 75113 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $591 million in CNDT’s case. LegacyTexas Financial Group Inc (NASDAQ:LTXB) is the most popular stock in this table. On the other hand Kinsale Capital Group, Inc. (NASDAQ:KNSL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Conduent Incorporated (NYSE:CNDT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CNDT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CNDT were disappointed as the stock returned -35.1% during 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
