We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Tyler Technologies, Inc. (NYSE:TYL) was in 26 hedge funds’ portfolios at the end of September. TYL has experienced an increase in support from the world’s most elite money managers lately. There were 24 hedge funds in our database with TYL positions at the end of the previous quarter. Our calculations also showed that TYL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the eyes of most market participants, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the upper echelon of this group, approximately 750 funds. Most estimates calculate that this group of people orchestrate the lion’s share of the smart money’s total capital, and by following their finest equity investments, Insider Monkey has identified several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now we’re going to take a glance at the latest hedge fund action surrounding Tyler Technologies, Inc. (NYSE:TYL).
What does smart money think about Tyler Technologies, Inc. (NYSE:TYL)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in TYL over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Praesidium Investment Management, managed by Kevin Oram and Peter Uddo, holds the most valuable position in Tyler Technologies, Inc. (NYSE:TYL). Praesidium Investment Management has a $158.7 million position in the stock, comprising 10.4% of its 13F portfolio. The second largest stake is held by RGM Capital, managed by Robert G. Moses, which holds a $126.1 million position; the fund has 8.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Ryan Pedlow’s Two Creeks Capital Management and Brian Bares’s Bares Capital Management. In terms of the portfolio weights assigned to each position Praesidium Investment Management allocated the biggest weight to Tyler Technologies, Inc. (NYSE:TYL), around 10.41% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, setting aside 8.39 percent of its 13F equity portfolio to TYL.
Now, key hedge funds have been driving this bullishness. Columbus Circle Investors, managed by Principal Global Investors, assembled the largest position in Tyler Technologies, Inc. (NYSE:TYL). Columbus Circle Investors had $26.6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $6.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Vikas Lunia’s Lunia Capital, David E. Shaw’s D E Shaw, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tyler Technologies, Inc. (NYSE:TYL) but similarly valued. These stocks are Insulet Corporation (NASDAQ:PODD), Altaba Inc. (NASDAQ:AABA), Eastman Chemical Company (NYSE:EMN), and Domino’s Pizza, Inc. (NYSE:DPZ). This group of stocks’ market valuations resemble TYL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PODD | 37 | 500045 | 13 |
| AABA | 48 | 4699502 | -11 |
| EMN | 27 | 409073 | 4 |
| DPZ | 36 | 1932455 | 9 |
| Average | 37 | 1885269 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1885 million. That figure was $603 million in TYL’s case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Eastman Chemical Company (NYSE:EMN) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Tyler Technologies, Inc. (NYSE:TYL) is even less popular than EMN. Hedge funds clearly dropped the ball on TYL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on TYL as the stock returned 61.5% in 2019 and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
