It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Ceridian HCM Holding Inc. (NYSE:CDAY) changed during the first quarter.
Ceridian HCM Holding Inc. (NYSE:CDAY) investors should pay attention to an increase in hedge fund interest recently. CDAY was in 30 hedge funds’ portfolios at the end of the first quarter of 2019. There were 17 hedge funds in our database with CDAY positions at the end of the previous quarter. Our calculations also showed that CDAY isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to review the key hedge fund action regarding Ceridian HCM Holding Inc. (NYSE:CDAY).
Hedge fund activity in Ceridian HCM Holding Inc. (NYSE:CDAY)
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 76% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in CDAY a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in Ceridian HCM Holding Inc. (NYSE:CDAY), which was worth $313.5 million at the end of the first quarter. On the second spot was Whale Rock Capital Management which amassed $241.6 million worth of shares. Moreover, Ashe Capital, Soros Fund Management, and Citadel Investment Group were also bullish on Ceridian HCM Holding Inc. (NYSE:CDAY), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names were leading the bulls’ herd. Soros Fund Management, managed by George Soros, created the biggest position in Ceridian HCM Holding Inc. (NYSE:CDAY). Soros Fund Management had $84.6 million invested in the company at the end of the quarter. Marcelo Desio’s Lucha Capital Management also made a $10.2 million investment in the stock during the quarter. The following funds were also among the new CDAY investors: Joseph Samuels’s Islet Management, Benjamin A. Smith’s Laurion Capital Management, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ceridian HCM Holding Inc. (NYSE:CDAY) but similarly valued. These stocks are Universal Display Corporation (NASDAQ:OLED), Sealed Air Corporation (NYSE:SEE), Liberty Property Trust (NYSE:LPT), and Exelixis, Inc. (NASDAQ:EXEL). This group of stocks’ market values are similar to CDAY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OLED | 18 | 133100 | 8 |
| SEE | 29 | 1118989 | -2 |
| LPT | 19 | 215440 | 0 |
| EXEL | 24 | 788343 | 0 |
| Average | 22.5 | 563968 | 1.5 |
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 $564 million. That figure was $987 million in CDAY’s case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Ceridian HCM Holding Inc. (NYSE:CDAY) is more popular among hedge funds. 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 CDAY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CDAY were disappointed as the stock returned -1.4% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
