Hedge Funds Keep Selling Paylocity Holding Corp (PCTY)

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Paylocity Holding Corp (NASDAQ:PCTY).

Paylocity Holding Corp (NASDAQ:PCTY) has seen a decrease in hedge fund interest in recent months. Paylocity Holding Corp (NASDAQ:PCTY) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. There were 22 hedge funds in our database with PCTY positions at the end of the first quarter. Our calculations also showed that PCTY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are seen as underperforming, old investment vehicles of the past. While there are more than 8000 funds trading at present, Our researchers look at the top tier of this club, approximately 850 funds. Most estimates calculate that this group of people preside over most of the smart money’s total capital, and by shadowing their unrivaled investments, Insider Monkey has uncovered a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

David Siegel of Two Sigma Advisors

Now let’s take a glance at the key hedge fund action regarding Paylocity Holding Corp (NASDAQ:PCTY).

Do Hedge Funds Think PCTY Is A Good Stock To Buy Now?

At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the first quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in PCTY a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Adams Street Partners was the largest shareholder of Paylocity Holding Corp (NASDAQ:PCTY), with a stake worth $164.7 million reported as of the end of June. Trailing Adams Street Partners was Echo Street Capital Management, which amassed a stake valued at $129.8 million. Alkeon Capital Management, Two Sigma Advisors, and Fisher Asset Management 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 Adams Street Partners allocated the biggest weight to Paylocity Holding Corp (NASDAQ:PCTY), around 34.21% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, dishing out 1.08 percent of its 13F equity portfolio to PCTY.

Judging by the fact that Paylocity Holding Corp (NASDAQ:PCTY) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few money managers who were dropping their full holdings in the second quarter. It’s worth mentioning that Nancy Zevenbergen’s Zevenbergen Capital Investments dropped the largest stake of all the hedgies watched by Insider Monkey, totaling close to $55.6 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks similar to Paylocity Holding Corp (NASDAQ:PCTY). These stocks are Ares Management Corp (NYSE:ARES), Kirkland Lake Gold Ltd. (NYSE:KL), Opendoor Technologies Inc. (NASDAQ:OPEN), Owens Corning (NYSE:OC), East West Bancorp, Inc. (NASDAQ:EWBC), Targa Resources Corp (NYSE:TRGP), and Asana Inc. (NYSE:ASAN). This group of stocks’ market caps resemble PCTY’s market cap.

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As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $533 million. That figure was $507 million in PCTY’s case. Opendoor Technologies Inc. (NASDAQ:OPEN) is the most popular stock in this table. On the other hand Ares Management Corp (NYSE:ARES) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Paylocity Holding Corp (NASDAQ:PCTY) is even less popular than ARES. Our overall hedge fund sentiment score for PCTY is 19.3. 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. Hedge funds clearly dropped the ball on PCTY as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on PCTY as the stock returned 54.2% since Q2 (through October 22nd) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.