Is Cognizant Technology Solutions Corp (NASDAQ:CTSH) worth your attention right now? Hedge funds are taking an optimistic view. The number of long hedge fund bets advanced by 9 lately.
According to most traders, hedge funds are viewed as underperforming, old financial tools of the past. While there are over 8000 funds in operation today, we choose to focus on the elite of this club, around 450 funds. It is estimated that this group has its hands on most of all hedge funds’ total asset base, and by watching their best investments, we have unsheathed a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as beneficial, positive insider trading activity is another way to parse down the stock market universe. Just as you’d expect, there are lots of motivations for a bullish insider to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this method if shareholders know what to do (learn more here).
With these “truths” under our belt, we’re going to take a gander at the recent action regarding Cognizant Technology Solutions Corp (NASDAQ:CTSH).
What have hedge funds been doing with Cognizant Technology Solutions Corp (NASDAQ:CTSH)?
In preparation for this quarter, a total of 41 of the hedge funds we track were long in this stock, a change of 28% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully.
Of the funds we track, Stephen Mandel’s Lone Pine Capital had the most valuable position in Cognizant Technology Solutions Corp (NASDAQ:CTSH), worth close to $663.8 million, comprising 3.4% of its total 13F portfolio. The second largest stake is held by Alan Fournier of Pennant Capital Management, with a $144.6 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Ken Griffin’s Citadel Investment Group, James Crichton and Adam Weiss’s Scout Capital Management and Bill Miller’s Legg Mason Capital Management.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Stevens Capital Management, managed by Matthew Tewksbury, established the largest position in Cognizant Technology Solutions Corp (NASDAQ:CTSH). Stevens Capital Management had 15.6 million invested in the company at the end of the quarter. James Dondero’s Highland Capital Management also initiated a $14.4 million position during the quarter. The other funds with brand new CTSH positions are Anand Parekh’s Alyeska Investment Group, Ray Dalio’s Bridgewater Associates, and Dmitry Balyasny’s Balyasny Asset Management.
How are insiders trading Cognizant Technology Solutions Corp (NASDAQ:CTSH)?
Insider buying is particularly usable when the company in focus has experienced transactions within the past 180 days. Over the latest six-month time period, Cognizant Technology Solutions Corp (NASDAQ:CTSH) has experienced zero unique insiders buying, and 8 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Cognizant Technology Solutions Corp (NASDAQ:CTSH). These stocks are NetSuite Inc (NYSE:N), Amdocs Limited (NYSE:DOX), Iron Mountain Incorporated (NYSE:IRM), Citrix Systems, Inc. (NASDAQ:CTXS), and Automatic Data Processing (NASDAQ:ADP). This group of stocks belong to the business software & services industry and their market caps are closest to CTSH’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| NetSuite Inc (NYSE:N) | 17 | 0 | 11 |
| Amdocs Limited (NYSE:DOX) | 21 | 0 | 0 |
| Iron Mountain Incorporated (NYSE:IRM) | 24 | 0 | 1 |
| Citrix Systems, Inc. (NASDAQ:CTXS) | 36 | 0 | 10 |
| Automatic Data Processing (NASDAQ:ADP) | 25 | 0 | 13 |
With the results exhibited by the aforementioned strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and Cognizant Technology Solutions Corp (NASDAQ:CTSH) is no exception.
