Hedge Funds Never Been Less Bullish On Conduent Incorporated (CNDT)

In this article you are going to find out whether hedge funds think Conduent Incorporated (NYSE:CNDT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Conduent Incorporated (NYSE:CNDT) worth your attention right now? Hedge funds are in a pessimistic mood. The number of long hedge fund positions were trimmed by 8 lately. Our calculations also showed that CNDT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of methods stock market investors put to use to appraise their holdings. Two of the most useful methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the S&P 500 by a healthy margin (see the details here).

Carl Icahn of Icahn Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the key hedge fund action regarding Conduent Incorporated (NYSE:CNDT).

What does smart money think about Conduent Incorporated (NYSE:CNDT)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CNDT over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Carl Icahn’s Icahn Capital LP has the number one position in Conduent Incorporated (NYSE:CNDT), worth close to $93.5 million, accounting for 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $18.5 million position; 0.4% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include David Paradice’s Paradice Investment Management, D. E. Shaw’s D E Shaw and  Renaissance Technologies. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Conduent Incorporated (NYSE:CNDT), around 1.88% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, dishing out 1.18 percent of its 13F equity portfolio to CNDT.

Judging by the fact that Conduent Incorporated (NYSE:CNDT) has experienced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that slashed their entire stakes heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $4.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $1.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 8 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Conduent Incorporated (NYSE:CNDT) but similarly valued. We will take a look at trivago N.V. (NASDAQ:TRVG), RAPT Therapeutics, Inc. (NASDAQ:RAPT), Knoll Inc (NYSE:KNL), and Cohu, Inc. (NASDAQ:COHU). This group of stocks’ market valuations resemble CNDT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $167 million in CNDT’s case. Knoll Inc (NYSE:KNL) is the most popular stock in this table. On the other hand RAPT Therapeutics, Inc. (NASDAQ:RAPT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Conduent Incorporated (NYSE:CNDT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately CNDT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CNDT were disappointed as the stock returned 1.2% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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