Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
ExlService Holdings, Inc. (NASDAQ:EXLS) was in 11 hedge funds’ portfolios at the end of June. EXLS shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 10 hedge funds in our database with EXLS holdings at the end of the previous quarter. Our calculations also showed that EXLS isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a large number of formulas investors use to evaluate publicly traded companies. Some of the most innovative formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best money managers can outperform the S&P 500 by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the latest hedge fund action surrounding ExlService Holdings, Inc. (NASDAQ:EXLS).
How are hedge funds trading ExlService Holdings, Inc. (NASDAQ:EXLS)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EXLS over the last 16 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.
The largest stake in ExlService Holdings, Inc. (NASDAQ:EXLS) was held by Renaissance Technologies, which reported holding $30 million worth of stock at the end of March. It was followed by GLG Partners with a $5 million position. Other investors bullish on the company included Millennium Management, Dalton Investments, and D E Shaw.
As aggregate interest increased, specific money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most outsized call position in ExlService Holdings, Inc. (NASDAQ:EXLS). PEAK6 Capital Management had $0.6 million invested in the company at the end of the quarter. Hoon Kim’s Quantinno Capital also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ExlService Holdings, Inc. (NASDAQ:EXLS) but similarly valued. We will take a look at Ligand Pharmaceuticals Inc. (NASDAQ:LGND), United Community Banks Inc (NASDAQ:UCBI), Altra Industrial Motion Corp. (NASDAQ:AIMC), and Insmed Incorporated (NASDAQ:INSM). This group of stocks’ market caps match EXLS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LGND | 19 | 416379 | -4 |
| UCBI | 12 | 56454 | -3 |
| AIMC | 14 | 272459 | -8 |
| INSM | 23 | 596261 | 5 |
| Average | 17 | 335388 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $45 million in EXLS’s case. Insmed Incorporated (NASDAQ:INSM) is the most popular stock in this table. On the other hand United Community Banks Inc (NASDAQ:UCBI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks ExlService Holdings, Inc. (NASDAQ:EXLS) is even less popular than UCBI. Hedge funds dodged a bullet by taking a bearish stance towards EXLS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EXLS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EXLS investors were disappointed as the stock returned 1.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
