Hedge Funds Aren’t Crazy About Automatic Data Processing (ADP) Anymore

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Automatic Data Processing (NASDAQ:ADP).

Automatic Data Processing investors should pay attention to a decrease in support from the world’s most elite money managers recently. At the end of this article we will also compare ADP to other stocks including American Tower Corp (NYSE:AMT), Deutsche Bank AG (USA) (NYSE:DB), and Anthem Inc (NYSE:ANTM) to get a better sense of its popularity.

In the financial world there are plenty of metrics investors employ to value their holdings. Two of the most underrated metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a solid amount (see the details here).

Now, let’s review the key action encompassing Automatic Data Processing (NASDAQ:ADP).

What does the smart money think about Automatic Data Processing (NASDAQ:ADP)?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Andy Brown’s Cedar Rock Capital has the number one position in Automatic Data Processing (NASDAQ:ADP), worth close to $342 million, amounting to 8.9% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $101 million position; 0.8% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Phill Gross and Robert Atchinson’s Adage Capital Management, Tom Gayner’s Markel Gayner Asset Management and Cliff Asness’s AQR Capital Management.

Due to the fact that Automatic Data Processing (NASDAQ:ADP) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $30.9 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $22.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 10 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Automatic Data Processing (NASDAQ:ADP). These stocks are American Tower Corp (NYSE:AMT), Deutsche Bank AG (USA) (NYSE:DB), Anthem Inc (NYSE:ANTM), and Public Storage (NYSE:PSA). All of these stocks’ market caps are similar to ADP’s market cap.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1573 million. That figure was $957 million in ADP’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand Deutsche Bank AG (USA) (NYSE:DB) is the least popular one with only 8 bullish hedge fund positions. Automatic Data Processing (NASDAQ:ADP) 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 ANTM might be a better candidate to consider a long position.