It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Ceridian HCM Holding Inc. (NYSE:CDAY) and compare its performance against hedge funds’ favorite stocks.
Ceridian HCM Holding Inc. (NYSE:CDAY) was in 28 hedge funds’ portfolios at the end of the third quarter of 2019. CDAY has experienced an increase in support from the world’s most elite money managers in recent months. There were 22 hedge funds in our database with CDAY holdings at the end of the previous quarter. Our calculations also showed that CDAY 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).
If you’d ask most investors, hedge funds are perceived as underperforming, old investment tools of yesteryear. While there are over 8000 funds with their doors open today, Our experts choose to focus on the masters of this group, approximately 750 funds. It is estimated that this group of investors watch over most of the smart money’s total capital, and by shadowing their best stock picks, Insider Monkey has unsheathed a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year 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 .
Ken Griffin of Citadel Investment Group
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 let’s take a look at the latest hedge fund action regarding Ceridian HCM Holding Inc. (NYSE:CDAY).
Hedge fund activity in Ceridian HCM Holding Inc. (NYSE:CDAY)
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CDAY over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Ceridian HCM Holding Inc. (NYSE:CDAY), which was worth $416.4 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $166.1 million worth of shares. Ashe Capital, Citadel Investment Group, and Alkeon Capital 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 Ashe Capital allocated the biggest weight to Ceridian HCM Holding Inc. (NYSE:CDAY), around 10.05% of its 13F portfolio. Sabrepoint Capital is also relatively very bullish on the stock, designating 4.27 percent of its 13F equity portfolio to CDAY.
As one would reasonably expect, specific money managers have jumped into Ceridian HCM Holding Inc. (NYSE:CDAY) headfirst. Junto Capital Management, managed by James Parsons, initiated the biggest position in Ceridian HCM Holding Inc. (NYSE:CDAY). Junto Capital Management had $20.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $17.4 million position during the quarter. The other funds with new positions in the stock are Sculptor Capital, Rob Citrone’s Discovery Capital Management, and Ken Fisher’s Fisher Asset Management.
Let’s check out hedge fund activity in other stocks similar to Ceridian HCM Holding Inc. (NYSE:CDAY). We will take a look at Autoliv Inc. (NYSE:ALV), Molina Healthcare, Inc. (NYSE:MOH), Owens Corning (NYSE:OC), and WABCO Holdings Inc. (NYSE:WBC). This group of stocks’ market caps match CDAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALV | 14 | 627166 | 1 |
| MOH | 25 | 1040324 | -7 |
| OC | 40 | 1305624 | 6 |
| WBC | 29 | 1218154 | -4 |
| Average | 27 | 1047817 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $1116 million in CDAY’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Autoliv Inc. (NYSE:ALV) is the least popular one with only 14 bullish hedge fund positions. Ceridian HCM Holding Inc. (NYSE:CDAY) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on CDAY as the stock returned 96.8% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
