Is Automatic Data Processing (NASDAQ:ADP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Automatic Data Processing (NASDAQ:ADP) the right investment to pursue these days? The smart money was becoming hopeful. The number of long hedge fund bets advanced by 2 in recent months. Automatic Data Processing (NASDAQ:ADP) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic is 56. Our calculations also showed that ADP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s take a peek at the key hedge fund action surrounding Automatic Data Processing (NASDAQ:ADP).
Do Hedge Funds Think ADP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards ADP over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Automatic Data Processing (NASDAQ:ADP) was held by Fundsmith LLP, which reported holding $1418.7 million worth of stock at the end of September. It was followed by Cedar Rock Capital with a $457.2 million position. Other investors bullish on the company included BlueSpruce Investments, GuardCap Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Automatic Data Processing (NASDAQ:ADP), around 10.96% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, setting aside 7.03 percent of its 13F equity portfolio to ADP.
Now, some big names have jumped into Automatic Data Processing (NASDAQ:ADP) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most valuable position in Automatic Data Processing (NASDAQ:ADP). Two Sigma Advisors had $123.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $96.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Rockefeller and KarláKroeker’s Woodline Partners, Mikal Patel’s Oribel Capital Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Automatic Data Processing (NASDAQ:ADP). These stocks are Uber Technologies, Inc. (NYSE:UBER), Altria Group Inc (NYSE:MO), Brookfield Asset Management Inc. (NYSE:BAM), Mercadolibre Inc (NASDAQ:MELI), The Blackstone Group Inc. (NYSE:BX), PNC Financial Services Group Inc. (NYSE:PNC), and Equinor ASA (NYSE:EQNR). This group of stocks’ market valuations resemble ADP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBER | 143 | 10766637 | 8 |
| MO | 45 | 829789 | -2 |
| BAM | 32 | 2498829 | -2 |
| MELI | 68 | 4371182 | -6 |
| BX | 54 | 2545773 | 0 |
| PNC | 41 | 506241 | 3 |
| EQNR | 11 | 163324 | 0 |
| Average | 56.3 | 3097396 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.3 hedge funds with bullish positions and the average amount invested in these stocks was $3097 million. That figure was $3616 million in ADP’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 bullish hedge fund positions. Automatic Data Processing (NASDAQ:ADP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ADP is 42.2. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on ADP as the stock returned 15.5% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
