At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ACI Worldwide Inc (NASDAQ:ACIW).
ACI Worldwide Inc (NASDAQ:ACIW) was in 24 hedge funds’ portfolios at the end of March. ACIW investors should be aware of an increase in enthusiasm from smart money lately. There were 20 hedge funds in our database with ACIW positions at the end of the previous quarter. Our calculations also showed that ACIW 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.
To the average investor there are plenty of signals investors use to evaluate their holdings. A pair of the most underrated signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy margin (see the details here).
Jeffrey Smith of Starboard Value LP
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 take a look at the key hedge fund action surrounding ACI Worldwide Inc (NASDAQ:ACIW).
How are hedge funds trading ACI Worldwide Inc (NASDAQ:ACIW)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the fourth quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in ACIW 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.
The largest stake in ACI Worldwide Inc (NASDAQ:ACIW) was held by Cardinal Capital, which reported holding $112.7 million worth of stock at the end of September. It was followed by P2 Capital Partners with a $45.8 million position. Other investors bullish on the company included Starboard Value LP, Wallace R. Weitz & Co., and Shannon River Fund Management. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to ACI Worldwide Inc (NASDAQ:ACIW), around 5.54% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, earmarking 5.47 percent of its 13F equity portfolio to ACIW.
As industrywide interest jumped, key money managers have been driving this bullishness. Starboard Value LP, managed by Jeffrey Smith, assembled the most outsized position in ACI Worldwide Inc (NASDAQ:ACIW). Starboard Value LP had $34.8 million invested in the company at the end of the quarter. Spencer M. Waxman’s Shannon River Fund Management also made a $18.8 million investment in the stock during the quarter. The other funds with brand new ACIW positions are Benjamin A. Smith’s Laurion Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ACI Worldwide Inc (NASDAQ:ACIW) but similarly valued. We will take a look at Novanta Inc. (NASDAQ:NOVT), PTC Therapeutics, Inc. (NASDAQ:PTCT), Acacia Communications, Inc. (NASDAQ:ACIA), and Omnicell, Inc. (NASDAQ:OMCL). This group of stocks’ market valuations are closest to ACIW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOVT | 10 | 20986 | -4 |
| PTCT | 28 | 378361 | -6 |
| ACIA | 22 | 693548 | -9 |
| OMCL | 17 | 54589 | 4 |
| Average | 19.25 | 286871 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $272 million in ACIW’s case. PTC Therapeutics, Inc. (NASDAQ:PTCT) is the most popular stock in this table. On the other hand Novanta Inc. (NASDAQ:NOVT) is the least popular one with only 10 bullish hedge fund positions. ACI Worldwide Inc (NASDAQ:ACIW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately ACIW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ACIW were disappointed as the stock returned 16% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
