Hedge Funds Are Buying Jack Henry & Associates, Inc. (JKHY)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Jack Henry & Associates, Inc. (NASDAQ:JKHY).

Jack Henry & Associates, Inc. (NASDAQ:JKHY) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. JKHY has experienced an increase in hedge fund interest lately. There were 20 hedge funds in our database with JKHY positions at the end of the first quarter. Our calculations also showed that JKHY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the fresh hedge fund action encompassing Jack Henry & Associates, Inc. (NASDAQ:JKHY).

Do Hedge Funds Think JKHY Is A Good Stock To Buy Now?

At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the first quarter of 2020. By comparison, 31 hedge funds held shares or bullish call options in JKHY a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Jack Henry & Associates, Inc. (NASDAQ:JKHY), which was worth $63.8 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $27.8 million worth of shares. Citadel Investment Group, Adage Capital Management, and GLG Partners 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 Quantamental Technologies allocated the biggest weight to Jack Henry & Associates, Inc. (NASDAQ:JKHY), around 0.81% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.81 percent of its 13F equity portfolio to JKHY.

Consequently, key hedge funds have jumped into Jack Henry & Associates, Inc. (NASDAQ:JKHY) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, created the most valuable position in Jack Henry & Associates, Inc. (NASDAQ:JKHY). Tudor Investment Corp had $3.5 million invested in the company at the end of the quarter. Ran Pang’s Quantamental Technologies also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Ray Dalio’s Bridgewater Associates.

Let’s now review hedge fund activity in other stocks similar to Jack Henry & Associates, Inc. (NASDAQ:JKHY). These stocks are Tapestry, Inc. (NYSE:TPR), The Mosaic Company (NYSE:MOS), Companhia Siderurgica Nacional (NYSE:SID), Snap-on Incorporated (NYSE:SNA), McAfee Corp. (NASDAQ:MCFE), Host Hotels and Resorts Inc (NYSE:HST), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market caps resemble JKHY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $541 million. That figure was $180 million in JKHY’s case. The Mosaic Company (NYSE:MOS) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 12 bullish hedge fund positions. Jack Henry & Associates, Inc. (NASDAQ:JKHY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JKHY is 44.4. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on JKHY as the stock returned 6.8% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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