Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Amdocs Limited (NASDAQ:DOX) investors should pay attention to a decrease in support from the world’s most elite money managers recently. DOX was in 23 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with DOX positions at the end of the previous quarter. Our calculations also showed that DOX 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.
To most traders, hedge funds are viewed as underperforming, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading at present, Our experts hone in on the bigwigs of this group, approximately 750 funds. Most estimates calculate that this group of people preside over the lion’s share of the smart money’s total asset base, and by shadowing their first-class picks, Insider Monkey has identified a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
John Overdeck of Two Sigma Advisors
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. We’re going to review the new hedge fund action encompassing Amdocs Limited (NASDAQ:DOX).
How are hedge funds trading Amdocs Limited (NASDAQ:DOX)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in DOX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Amdocs Limited (NASDAQ:DOX), with a stake worth $174.7 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $105.6 million. D E Shaw, Ariel Investments, and Two Sigma Advisors 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 Lunia Capital allocated the biggest weight to Amdocs Limited (NASDAQ:DOX), around 3.65% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, dishing out 1.33 percent of its 13F equity portfolio to DOX.
Because Amdocs Limited (NASDAQ:DOX) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that slashed their positions entirely in the third quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $6.4 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $2.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Amdocs Limited (NASDAQ:DOX). We will take a look at CyrusOne Inc (NASDAQ:CONE), SEI Investments Company (NASDAQ:SEIC), Mohawk Industries, Inc. (NYSE:MHK), and Crown Holdings, Inc. (NYSE:CCK). All of these stocks’ market caps match DOX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CONE | 21 | 314844 | 3 |
| SEIC | 23 | 390443 | 1 |
| MHK | 32 | 1522732 | -1 |
| CCK | 42 | 1266913 | 7 |
| Average | 29.5 | 873733 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $874 million. That figure was $621 million in DOX’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand CyrusOne Inc (NASDAQ:CONE) is the least popular one with only 21 bullish hedge fund positions. Amdocs Limited (NASDAQ:DOX) 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. 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. Unfortunately DOX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DOX investors were disappointed as the stock returned 4.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
