We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Paychex, Inc. (NASDAQ:PAYX).
Is Paychex, Inc. (NASDAQ:PAYX) a buy, sell, or hold? Hedge funds were betting on the stock. The number of bullish hedge fund positions advanced by 5 in recent months. Paychex, Inc. (NASDAQ:PAYX) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that PAYX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Israel Englander of Millennium Management
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 glance at the fresh hedge fund action encompassing Paychex, Inc. (NASDAQ:PAYX).
Do Hedge Funds Think PAYX Is A Good Stock To Buy Now?
At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PAYX over the last 25 quarters. So, let’s examine 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 Paychex, Inc. (NASDAQ:PAYX), which was worth $574.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $127.9 million worth of shares. Millennium Management, Two Sigma Advisors, and Citadel Investment Group 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 Select Equity Group allocated the biggest weight to Paychex, Inc. (NASDAQ:PAYX), around 1.93% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.33 percent of its 13F equity portfolio to PAYX.
Now, key hedge funds have jumped into Paychex, Inc. (NASDAQ:PAYX) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Paychex, Inc. (NASDAQ:PAYX). Two Sigma Advisors had $61.9 million invested in the company at the end of the quarter. Renaissance Technologies also made a $44 million investment in the stock during the quarter. The other funds with brand new PAYX positions are Michael Gelband’s ExodusPoint Capital, D. 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 Paychex, Inc. (NASDAQ:PAYX) but similarly valued. These stocks are Electronic Arts Inc. (NASDAQ:EA), Constellation Brands, Inc. (NYSE:STZ), Sempra Energy (NYSE:SRE), Aptiv PLC (NYSE:APTV), Baxter International Inc. (NYSE:BAX), SYSCO Corporation (NYSE:SYY), and STMicroelectronics N.V. (NYSE:STM). This group of stocks’ market caps are closest to PAYX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EA | 53 | 1097032 | -3 |
| STZ | 53 | 1719109 | 3 |
| SRE | 23 | 287269 | -5 |
| APTV | 44 | 1757047 | 4 |
| BAX | 42 | 3485785 | -4 |
| SYY | 29 | 2245599 | -11 |
| STM | 11 | 49115 | -2 |
| Average | 36.4 | 1520137 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1520 million. That figure was $1115 million in PAYX’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 11 bullish hedge fund positions. Paychex, Inc. (NASDAQ:PAYX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PAYX is 62.3. 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 beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on PAYX, though not to the same extent, as the stock returned 6.6% since the end of Q3 (through November 30th) and outperformed the market.
Follow Paychex Inc (NASDAQ:PAYX)
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Disclosure: None. This article was originally published at Insider Monkey.
