The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Paylocity Holding Corp (NASDAQ:PCTY).
Paylocity Holding Corp (NASDAQ:PCTY) was in 22 hedge funds’ portfolios at the end of March. The all time high for this statistic is 33. PCTY has seen a decrease in hedge fund sentiment in recent months. There were 26 hedge funds in our database with PCTY holdings at the end of December. Our calculations also showed that PCTY isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think PCTY Is A Good Stock To Buy Now?
At first quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PCTY over the last 23 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.
More specifically, Adams Street Partners was the largest shareholder of Paylocity Holding Corp (NASDAQ:PCTY), with a stake worth $155.2 million reported as of the end of March. Trailing Adams Street Partners was Echo Street Capital Management, which amassed a stake valued at $106.6 million. Alkeon Capital Management, Zevenbergen Capital Investments, and Two Sigma Advisors 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 Adams Street Partners allocated the biggest weight to Paylocity Holding Corp (NASDAQ:PCTY), around 24.87% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 1.37 percent of its 13F equity portfolio to PCTY.
Due to the fact that Paylocity Holding Corp (NASDAQ:PCTY) has experienced bearish sentiment from hedge fund managers, we can see that there exists a select few funds who sold off their positions entirely last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the biggest position of all the hedgies tracked by Insider Monkey, comprising about $13.9 million in stock, and Michel Massoud’s Melqart Asset Management was right behind this move, as the fund dumped about $3.2 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Paylocity Holding Corp (NASDAQ:PCTY). We will take a look at Paysafe Limited (NYSE:PSFE), Western Alliance Bancorporation (NYSE:WAL), McAfee Corp. (NASDAQ:MCFE), ContextLogic Inc. (NASDAQ:WISH), Bruker Corporation (NASDAQ:BRKR), Arrival (NASDAQ:ARVL), and CF Industries Holdings, Inc. (NYSE:CF). All of these stocks’ market caps are similar to PCTY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSFE | 41 | 1326259 | 41 |
| WAL | 23 | 141015 | 1 |
| MCFE | 17 | 174841 | -3 |
| WISH | 25 | 297175 | 1 |
| BRKR | 22 | 219602 | -1 |
| ARVL | 14 | 164035 | 14 |
| CF | 44 | 879911 | 2 |
| Average | 26.6 | 457548 | 7.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $539 million in PCTY’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Arrival (NASDAQ:ARVL) is the least popular one with only 14 bullish hedge fund positions. Paylocity Holding Corp (NASDAQ:PCTY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PCTY is 34.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately PCTY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PCTY investors were disappointed as the stock returned 6.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
