It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ceridian HCM Holding Inc. (NYSE:CDAY). Currently, there is only one ETF with a significant allocation to CDAY: Renaissance IPO ETF (NYSE:IPO)
Ceridian HCM Holding Inc. (NYSE:CDAY) was in 28 hedge funds’ portfolios at the end of September. CDAY has seen an increase in hedge fund interest lately. There were 22 hedge funds in our database with CDAY holdings at the end of the previous quarter. Our calculations also showed that CDAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous signals market participants employ to assess their stock investments. Two of the less utilized signals are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outclass the S&P 500 by a superb amount (see the details here).
Ken Griffin of Citadel Investment Group
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the fresh hedge fund action encompassing Ceridian HCM Holding Inc. (NYSE:CDAY).
What have hedge funds been doing with Ceridian HCM Holding Inc. (NYSE:CDAY)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CDAY over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the biggest position in Ceridian HCM Holding Inc. (NYSE:CDAY), worth close to $416.4 million, corresponding to 2.8% of its total 13F portfolio. On Select Equity Group’s heels is Whale Rock Capital Management, led by Alex Sacerdote, holding a $166.1 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain William Crowley, William Harker, and Stephen Blass’s Ashe Capital, Ken Griffin’s Citadel Investment Group and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Ceridian HCM Holding Inc. (NYSE:CDAY), around 10.05% of its portfolio. Sabrepoint Capital is also relatively very bullish on the stock, setting aside 4.27 percent of its 13F equity portfolio to CDAY.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Junto Capital Management, managed by James Parsons, established the most outsized position in Ceridian HCM Holding Inc. (NYSE:CDAY). Junto Capital Management had $20.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $17.4 million position during the quarter. The following funds were also among the new CDAY investors: Daniel S. Och (founder)’s Sculptor Capital, Rob Citrone’s Discovery Capital Management, and Ken Fisher’s Fisher Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ceridian HCM Holding Inc. (NYSE:CDAY) but similarly valued. We will take a look at Autoliv Inc. (NYSE:ALV), Molina Healthcare, Inc. (NYSE:MOH), Owens Corning (NYSE:OC), and WABCO Holdings Inc. (NYSE:WBC). This group of stocks’ market values are similar to CDAY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALV | 14 | 627166 | 1 |
| MOH | 25 | 1040324 | -7 |
| OC | 40 | 1305624 | 6 |
| WBC | 29 | 1218154 | -4 |
| Average | 27 | 1047817 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $1116 million in CDAY’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Autoliv Inc. (NYSE:ALV) is the least popular one with only 14 bullish hedge fund positions. Ceridian HCM Holding Inc. (NYSE:CDAY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CDAY as the stock returned 22.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
