Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Accenture Plc (NYSE:ACN)? The smart money sentiment can provide an answer to this question.
Is Accenture Plc (NYSE:ACN) ready to rally soon? Investors who are in the know are buying. The number of bullish hedge fund positions improved by 4 lately. Our calculations also showed that ACN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kevin Oram of Praesidium Investment Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action encompassing Accenture Plc (NYSE:ACN).
What does smart money think about Accenture Plc (NYSE:ACN)?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in ACN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Accenture Plc (NYSE:ACN), which was worth $294.2 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $148.7 million worth of shares. Praesidium Investment Management, Two Sigma Advisors, and Intermede Investment Partners 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 Praesidium Investment Management allocated the biggest weight to Accenture Plc (NYSE:ACN), around 8.17% of its portfolio. Intermede Investment Partners is also relatively very bullish on the stock, designating 3.56 percent of its 13F equity portfolio to ACN.
As aggregate interest increased, key money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the most outsized position in Accenture Plc (NYSE:ACN). Laurion Capital Management had $23.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $18.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Karim Abbadi and Edward McBride’s Centiva Capital, Ronald Hua’s Qtron Investments, and Richard Chilton’s Chilton Investment Company.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Accenture Plc (NYSE:ACN) but similarly valued. We will take a look at Novo Nordisk A/S (NYSE:NVO), Paypal Holdings Inc (NASDAQ:PYPL), Honeywell International Inc. (NYSE:HON), and Texas Instruments Incorporated (NASDAQ:TXN). This group of stocks’ market caps match ACN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVO | 21 | 3007327 | 4 |
| PYPL | 95 | 4135931 | 0 |
| HON | 53 | 1926350 | -3 |
| TXN | 52 | 2578705 | 9 |
| Average | 55.25 | 2912078 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.25 hedge funds with bullish positions and the average amount invested in these stocks was $2912 million. That figure was $1121 million in ACN’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 21 bullish hedge fund positions. Accenture Plc (NYSE:ACN) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ACN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACN investors were disappointed as the stock returned 5% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
