Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Paycom Software Inc (NYSE:PAYC).
Is Paycom Software Inc (NYSE:PAYC) a worthy investment right now? Prominent investors were buying. The number of bullish hedge fund bets moved up by 11 lately. Paycom Software Inc (NYSE:PAYC) was in 46 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PAYC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the recent hedge fund action regarding Paycom Software Inc (NYSE:PAYC).
Do Hedge Funds Think PAYC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PAYC over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Paycom Software Inc (NYSE:PAYC), with a stake worth $135.5 million reported as of the end of March. Trailing Citadel Investment Group was Echo Street Capital Management, which amassed a stake valued at $121.3 million. Fisher Asset Management, Alyeska Investment Group, and Fundsmith LLP 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 Cat Rock Capital allocated the biggest weight to Paycom Software Inc (NYSE:PAYC), around 7.05% of its 13F portfolio. Mondrian Capital is also relatively very bullish on the stock, designating 4.51 percent of its 13F equity portfolio to PAYC.
Now, key hedge funds have jumped into Paycom Software Inc (NYSE:PAYC) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Paycom Software Inc (NYSE:PAYC). Balyasny Asset Management had $43.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $30.8 million position during the quarter. The following funds were also among the new PAYC investors: Suraj Parkash Chopra’s Force Hill Capital Management, Tor Minesuk’s Mondrian Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Paycom Software Inc (NYSE:PAYC) but similarly valued. These stocks are Nokia Corporation (NYSE:NOK), Edison International (NYSE:EIX), McCormick & Company, Incorporated (NYSE:MKC), PPL Corporation (NYSE:PPL), Equifax Inc. (NYSE:EFX), Cerner Corporation (NASDAQ:CERN), and POSCO (NYSE:PKX). This group of stocks’ market values match PAYC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOK | 21 | 352915 | 2 |
| EIX | 35 | 1564442 | 5 |
| MKC | 35 | 1969760 | -1 |
| PPL | 25 | 152408 | 4 |
| EFX | 37 | 2475296 | 1 |
| CERN | 40 | 1135093 | 6 |
| PKX | 12 | 157036 | 2 |
| Average | 29.3 | 1115279 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $1115 million. That figure was $970 million in PAYC’s case. Cerner Corporation (NASDAQ:CERN) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Paycom Software Inc (NYSE:PAYC) is more popular among hedge funds. Our overall hedge fund sentiment score for PAYC is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately PAYC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PAYC were disappointed as the stock returned -4.8% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
