Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Convergys Corporation (NYSE:CVG).
Convergys Corporation (NYSE:CVG) was in 22 hedge funds’ portfolios at the end of the third quarter of 2018. CVG shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 16 hedge funds in our database with CVG positions at the end of the previous quarter. Our calculations also showed that CVG isn’t among the 30 most popular stocks among hedge funds.
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. 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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to view the new hedge fund action surrounding Convergys Corporation (NYSE:CVG).
Hedge fund activity in Convergys Corporation (NYSE:CVG)
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CVG over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in Convergys Corporation (NYSE:CVG). AQR Capital Management has a $80.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $56.9 million position; 1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism include Noam Gottesman’s GLG Partners, D. E. Shaw’s D E Shaw and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the most outsized position in Convergys Corporation (NYSE:CVG). LMR Partners had $14.5 million invested in the company at the end of the quarter. Shane Finemore’s Manikay Partners also initiated a $12.2 million position during the quarter. The other funds with new positions in the stock are Tom Sandell’s Sandell Asset Management, Tony Chedraoui’s Tyrus Capital, and Robert Emil Zoellner’s Alpine Associates.
Let’s now review hedge fund activity in other stocks similar to Convergys Corporation (NYSE:CVG). We will take a look at SRC Energy Inc. (NYSE:SRCI), Steelcase Inc. (NYSE:SCS), Tellurian Inc. (NASDAQ:TELL), and Tower Semiconductor Ltd. (NASDAQ:TSEM). This group of stocks’ market caps match CVG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRCI | 15 | 366691 | 2 |
| SCS | 19 | 131526 | 4 |
| TELL | 14 | 76226 | -1 |
| TSEM | 13 | 286560 | 0 |
| Average | 15.25 | 215251 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $276 million in CVG’s case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand Tower Semiconductor Ltd. (NASDAQ:TSEM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Convergys Corporation (NYSE:CVG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
