Is EPAM Systems Inc (EPAM) A Good Stock To Buy?

Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards EPAM Systems Inc (NYSE:EPAM).

Is EPAM Systems Inc the right investment to pursue these days? Prominent investors are turning less bullish. The number of bullish hedge fund positions went down by 1 in recent months. EPAM was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 19 hedge funds in our database with EPAM holdings at the end of the previous quarter. 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 BankUnited (NYSE:BKU), Tenet Healthcare Corp (NYSE:THC), and Buffalo Wild Wings (NASDAQ:BWLD) to gather more data points.

At the moment there are a multitude of signals stock market investors have at their disposal to value stocks. A couple of the best signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat the market by a solid amount (see the details here).

With all of this in mind, let’s go over the latest action encompassing EPAM Systems Inc (NYSE:EPAM).

How have hedgies been trading EPAM Systems Inc (NYSE:EPAM)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 5% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Southpoint Capital Advisors, managed by John Smith Clark, holds the largest position in EPAM Systems Inc (NYSE:EPAM). The fund reportedly holds a $130.4 million position in the stock, comprising 5.8% of its 13F portfolio. The second largest stake is held by Newbrook Capital Advisors, led by Robert Boucai, holding a $54.9 million position; the fund has 7.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Matthew A. Weatherbie’s Weatherbie Capital, Alex Sacerdote’s Whale Rock Capital Management and Sahm Adrangi’s Kerrisdale Capital.

Due to the fact that EPAM Systems Inc (NYSE:EPAM) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds who were dropping their full holdings heading into Q4. At the top of the heap, Alok Agrawal’s Bloom Tree Partners said goodbye to the biggest position of the 700 funds watched by Insider Monkey, valued at an estimated $38.1 million in stock. Matthew Knauer and Mina Faltas’s fund, Nokota Management, also dumped its holding of the stock, about $8.9 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 fund heading into Q4.

Let’s now review hedge fund activity in other stocks similar to EPAM Systems Inc (NYSE:EPAM). We will take a look at BankUnited (NYSE:BKU), Tenet Healthcare Corp (NYSE:THC), Buffalo Wild Wings (NASDAQ:BWLD), and Allegiant Travel Company (NASDAQ:ALGT). This group of stocks’ market values are similar to EPAM’s market value.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $301 million in EPAM’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table, while BankUnited (NYSE:BKU) is at the other end of the specter with only 14 bullish hedge fund positions. EPAM Systems Inc (NYSE:EPAM) 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 THC might be a better candidate to consider a long position.