Hedge Funds Are Betting On FactSet Research Systems Inc. (FDS)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at FactSet Research Systems Inc. (NYSE:FDS) from the perspective of those elite funds.

FactSet Research Systems Inc. (NYSE:FDS) has seen an increase in hedge fund sentiment lately. At the end of this article we will also compare FDS to other stocks, including Alliant Energy Corporation (NYSE:LNT), AutoNation, Inc. (NYSE:AN), and Duke Realty Corp (NYSE:DRE) to get a better sense of its popularity.

According to most market participants, hedge funds are perceived as underperforming, outdated investment vehicles of years past. While there are greater than an 8000 funds trading today, Our researchers look at the masters of this club, around 700 funds. It is estimated that this group of investors orchestrate bulk of all hedge funds’ total asset base, and by following their unrivaled investments, Insider Monkey has formulated many investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, let’s take a glance at the recent action regarding FactSet Research Systems Inc. (NYSE:FDS).

How are hedge funds trading FactSet Research Systems Inc. (NYSE:FDS)?

At the Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brian Bares’ Bares Capital Management has the number one position in FactSet Research Systems Inc. (NYSE:FDS), worth close to $48.7 million, accounting for 4.8% of its total 13F portfolio. On Bares Capital Management’s heels is Renaissance Technologies, holding a $44.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of Tom Gayner’s Markel Gayner Asset Management, Cliff Asness’ AQR Capital Management and D. E. Shaw’s D E Shaw.

Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the biggest position in FactSet Research Systems Inc. (NYSE:FDS). Millennium Management had $4.4 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $4 million position during the quarter. The other funds with brand new FDS positions are Simon Sadler’s Segantii Capital, Josh Goldberg’s G2 Investment Partners Management, and Ray Dalio’s Bridgewater Associates.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FactSet Research Systems Inc. (NYSE:FDS) but similarly valued. We will take a look at Alliant Energy Corporation (NYSE:LNT), AutoNation, Inc. (NYSE:AN), Duke Realty Corp (NYSE:DRE), and Weatherford International Ltd (NYSE:WFT). This group of stocks’ market caps match FDS’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $516 million. That figure was $170 million in FDS’s case. AutoNation, Inc. (NYSE:AN) is the most popular stock in this table. On the other hand Duke Realty Corp (NYSE:DRE) is the least popular one with only 12 bullish hedge fund positions. FactSet Research Systems Inc. (NYSE:FDS) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AN might be a better candidate to consider a long position.