We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Jack Henry & Associates, Inc. (NASDAQ:JKHY) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Jack Henry & Associates, Inc. (NASDAQ:JKHY) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. JKHY investors should be aware of an increase in enthusiasm from smart money of late. There were 21 hedge funds in our database with JKHY holdings at the end of the previous quarter. Our calculations also showed that JKHY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a multitude of formulas investors have at their disposal to value their stock investments. A couple of the best formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass their index-focused peers by a significant margin (see the details here).
David E. Shaw of D.E. Shaw
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. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding Jack Henry & Associates, Inc. (NASDAQ:JKHY).
How are hedge funds trading Jack Henry & Associates, Inc. (NASDAQ:JKHY)?
At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JKHY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the largest position in Jack Henry & Associates, Inc. (NASDAQ:JKHY). D E Shaw has a $31.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $28.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Jack Henry & Associates, Inc. (NASDAQ:JKHY), around 4.42% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.32 percent of its 13F equity portfolio to JKHY.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Renaissance Technologies, assembled the largest position in Jack Henry & Associates, Inc. (NASDAQ:JKHY). Renaissance Technologies had $14.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $6.6 million position during the quarter. The following funds were also among the new JKHY investors: Joel Greenblatt’s Gotham Asset Management, Matthew Tewksbury’s Stevens Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Jack Henry & Associates, Inc. (NASDAQ:JKHY). These stocks are Vistra Energy Corp. (NYSE:VST), Datadog, Inc. (NASDAQ:DDOG), West Pharmaceutical Services Inc. (NYSE:WST), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks’ market caps are similar to JKHY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VST | 49 | 2192176 | 4 |
| DDOG | 32 | 439020 | -7 |
| WST | 29 | 428409 | -5 |
| BRO | 23 | 703042 | -8 |
| Average | 33.25 | 940662 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $941 million. That figure was $260 million in JKHY’s case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 23 bullish hedge fund positions. Jack Henry & Associates, Inc. (NASDAQ:JKHY) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on JKHY as the stock returned 1.9% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
