Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is FactSet Research Systems Inc. (NYSE:FDS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
FactSet Research Systems Inc. (NYSE:FDS) was in 24 hedge funds’ portfolios at the end of December. FDS shareholders have witnessed an increase in enthusiasm from smart money recently. There were 21 hedge funds in our database with FDS positions at the end of the previous quarter. Our calculations also showed that FDS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Louis Navellier of Navellier & Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the new hedge fund action surrounding FactSet Research Systems Inc. (NYSE:FDS).
What have hedge funds been doing with FactSet Research Systems Inc. (NYSE:FDS)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FDS over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, GLG Partners held the most valuable stake in FactSet Research Systems Inc. (NYSE:FDS), which was worth $85.8 million at the end of the third quarter. On the second spot was Markel Gayner Asset Management which amassed $31.3 million worth of shares. Echo Street Capital Management, Arrowstreet Capital, and Millennium Management 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 Markel Gayner Asset Management allocated the biggest weight to FactSet Research Systems Inc. (NYSE:FDS), around 0.43% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.4 percent of its 13F equity portfolio to FDS.
Consequently, key money managers were leading the bulls’ herd. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), created the biggest position in FactSet Research Systems Inc. (NYSE:FDS). Schonfeld Strategic Advisors had $2.9 million invested in the company at the end of the quarter. Ran Pang’s Quantamental Technologies also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Louis Navellier’s Navellier & Associates, and Matthew L Pinz’s Pinz Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FactSet Research Systems Inc. (NYSE:FDS) but similarly valued. We will take a look at Aqua America Inc (NYSE:WTR), Formula One Group (NASDAQ:FWONA), BeiGene, Ltd. (NASDAQ:BGNE), and Pinnacle West Capital Corporation (NYSE:PNW). This group of stocks’ market caps are closest to FDS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTR | 21 | 704399 | -14 |
| FWONA | 22 | 427777 | 2 |
| BGNE | 16 | 2963457 | 6 |
| PNW | 25 | 817992 | -2 |
| Average | 21 | 1228406 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $225 million in FDS’s case. Pinnacle West Capital Corporation (NYSE:PNW) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 16 bullish hedge fund positions. FactSet Research Systems Inc. (NYSE:FDS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on FDS as the stock returned -15.5% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
