Is CDAY Stock A Buy or Sell?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Ceridian HCM Holding Inc. (NYSE:CDAY).

Is CDAY stock a buy? Prominent investors were getting less bullish. The number of bullish hedge fund bets were trimmed by 10 in recent months. Ceridian HCM Holding Inc. (NYSE:CDAY) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 36. Our calculations also showed that CDAY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 36 hedge funds in our database with CDAY holdings at the end of September.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Ceridian HCM Holding Inc. (NYSE:CDAY).

Do Hedge Funds Think CDAY Is A Good Stock To Buy Now?

At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CDAY over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Select Equity Group held the most valuable stake in Ceridian HCM Holding Inc. (NYSE:CDAY), which was worth $667.4 million at the end of the fourth quarter. On the second spot was Ashe Capital which amassed $129.9 million worth of shares. Echo Street Capital Management, Citadel Investment Group, and Alkeon Capital Management 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 Ashe Capital allocated the biggest weight to Ceridian HCM Holding Inc. (NYSE:CDAY), around 8.12% of its 13F portfolio. Sabrepoint Capital is also relatively very bullish on the stock, dishing out 3.26 percent of its 13F equity portfolio to CDAY.

Seeing as Ceridian HCM Holding Inc. (NYSE:CDAY) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few funds that elected to cut their positions entirely heading into Q1. It’s worth mentioning that Alex Sacerdote’s Whale Rock Capital Management said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $182.2 million in stock, and Andreas Halvorsen’s Viking Global was right behind this move, as the fund said goodbye to about $168.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 10 funds heading into Q1.

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. These stocks are Cardinal Health, Inc. (NYSE:CAH), Albemarle Corporation (NYSE:ALB), Live Nation Entertainment, Inc. (NYSE:LYV), The AES Corporation (NYSE:AES), KB Financial Group, Inc. (NYSE:KB), Lyft, Inc. (NASDAQ:LYFT), and MGM Resorts International (NYSE:MGM). This group of stocks’ market valuations are similar to CDAY’s market valuation.

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As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1026 million. That figure was $1282 million in CDAY’s case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 5 bullish hedge fund positions. Ceridian HCM Holding Inc. (NYSE:CDAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CDAY is 39. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately CDAY wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); CDAY investors were disappointed as the stock returned -13.5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.