While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding ACI Worldwide Inc (NASDAQ:ACIW).
Is ACI Worldwide Inc (NASDAQ:ACIW) a buy here? The smart money is becoming more confident. The number of long hedge fund positions improved by 2 recently. Our calculations also showed that aciw isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action encompassing ACI Worldwide Inc (NASDAQ:ACIW).
How are hedge funds trading ACI Worldwide Inc (NASDAQ:ACIW)?
At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in ACIW over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cardinal Capital was the largest shareholder of ACI Worldwide Inc (NASDAQ:ACIW), with a stake worth $156.3 million reported as of the end of March. Trailing Cardinal Capital was P2 Capital Partners, which amassed a stake valued at $51.7 million. Arrowstreet Capital, Greenvale Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in ACI Worldwide Inc (NASDAQ:ACIW). Arrowstreet Capital had $29.8 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $3.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks similar to ACI Worldwide Inc (NASDAQ:ACIW). These stocks are Air Lease Corp (NYSE:AL), Olin Corporation (NYSE:OLN), Wintrust Financial Corporation (NASDAQ:WTFC), and Stifel Financial Corp. (NYSE:SF). This group of stocks’ market valuations match ACIW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AL | 23 | 312641 | -10 |
| OLN | 28 | 622842 | -5 |
| WTFC | 23 | 380893 | -1 |
| SF | 16 | 171601 | 4 |
| Average | 22.5 | 371994 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $348 million in ACIW’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Stifel Financial Corp. (NYSE:SF) is the least popular one with only 16 bullish hedge fund positions. ACI Worldwide Inc (NASDAQ:ACIW) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ACIW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACIW were disappointed as the stock returned -2.4% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
