Infosys Ltd ADR (INFY): Are Hedge Funds Right About This Stock?

Is Infosys Ltd ADR (NYSE:INFY) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. 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 find the latest market-moving information.

Is Infosys Ltd ADR (NYSE:INFY) the right pick for your portfolio? The best stock pickers are becoming less confident. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings went down by 3 lately. INFYwas in 20 hedge funds’ portfolios at the end of the third quarter of 2016. There were 23 hedge funds in our database with INFY holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Bank of Montreal (USA) (NYSE:BMO), FedEx Corporation (NYSE:FDX), and PNC Financial Services (NYSE:PNC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What have hedge funds been doing with Infosys Ltd ADR (NYSE:INFY)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 13% decrease from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in INFY at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Infosys Ltd ADR (NYSE:INFY), worth close to $383.3 million. The second largest stake is held by AQR Capital Management, led by Cliff Asness, which holds a $242 million position. Remaining hedge funds and institutional investors that are bullish include Bernard Horn’s Polaris Capital Management, Jim Simons’ Renaissance Technologies, and Simon Sadler’s Segantii Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Infosys Ltd ADR (NYSE:INFY) has weathered declining sentiment from hedge fund managers, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cashed in the biggest investment of the 700 funds tracked by Insider Monkey, comprising an estimated $121.2 million in stock, and Ernest Chow and Jonathan Howe’s Sensato Capital Management was right behind this move, as the fund dropped about $11.3 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks similar to Infosys Ltd ADR (NYSE:INFY). We will take a look at Bank of Montreal (USA) (NYSE:BMO), FedEx Corporation (NYSE:FDX), PNC Financial Services (NYSE:PNC), and America Movil SAB de CV (ADR) (NYSE:AMX). This group of stocks’ market valuations are similar to INFY’s market valuation.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1.6 billion. That figure was $823 million in INFY’s case. PNC Financial Services (NYSE:PNC) is the most popular stock in this table. On the other hand America Movil SAB de CV (ADR) (NYSE:AMX) is the least popular one with only 11 bullish hedge fund positions. Infosys Ltd ADR (NYSE:INFY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PNC might be a better candidate to consider taking a long position in.

Disclosure: None