Is CGI Group Inc. (USA) (GIB) a Good Buy?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards CGI Group Inc. (USA) (NYSE:GIB), and what that likely means for the prospects of the company and its stock.

CGI Group Inc. (USA) (NYSE:GIB) has seen a decrease in support from the world’s most elite money managers lately. 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 Autodesk, Inc. (NASDAQ:ADSK), Philippine Long Distance Telephone (ADR) (NYSE:PHI), and Tiffany & Co. (NYSE:TIF) to gather more data points.

If you’d ask most market participants, hedge funds are perceived as slow, old financial vehicles of years past. While there are over an 8000 funds trading at present, Our researchers hone in on the top tier of this group, approximately 700 funds. Most estimates calculate that this group of people oversee most of the smart money’s total asset base, and by observing their unrivaled equity investments, Insider Monkey has figured out many investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s review the latest action regarding CGI Group Inc. (USA) (NYSE:GIB).

What have hedge funds been doing with CGI Group Inc. (USA) (NYSE:GIB)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Eric Sprott’s Sprott Asset Management has the most valuable position in CGI Group Inc. (USA) (NYSE:GIB), worth close to $29.4 million, corresponding to 1.8% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $27.8 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Joel Greenblatt’s Gotham Asset Management, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Since CGI Group Inc. (USA) (NYSE:GIB) has witnessed falling interest from the smart money, it’s easy to see that there were a few funds who were dropping their full holdings in the third quarter. Interestingly, Neil Chriss’s Hutchin Hill Capital dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $1.8 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dropped about $1.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CGI Group Inc. (USA) (NYSE:GIB) but similarly valued. We will take a look at Autodesk, Inc. (NASDAQ:ADSK), Philippine Long Distance Telephone (ADR) (NYSE:PHI), Tiffany & Co. (NYSE:TIF), and Grupo Financero Sntdr Mxco SAB de CV ADR (NYSE:BSMX). This group of stocks’ market caps match GIB’s market cap.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $646 million. That figure was $97 million in GIB’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Philippine Long Distance Telephone (ADR) (NYSE:PHI) is the least popular one with only 7 bullish hedge fund positions. CGI Group Inc. (USA) (NYSE:GIB) 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 TIF might be a better candidate to consider a long position.