Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Fidelity National Information Services Inc. (NYSE:FIS)? The smart money sentiment can provide an answer to this question.
Is Fidelity National Information Services Inc. (NYSE:FIS) a good stock to buy? Prominent investors were becoming less confident. The number of bullish hedge fund positions were trimmed by 14 in recent months. Fidelity National Information Services Inc. (NYSE:FIS) was in 74 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 111. Our calculations also showed that FIS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 88 hedge funds in our database with FIS positions at the end of the fourth quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Von Mueffling of Cantillon Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a glance at the key hedge fund action surrounding Fidelity National Information Services Inc. (NYSE:FIS).
Do Hedge Funds Think FIS Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FIS over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Viking Global was the largest shareholder of Fidelity National Information Services Inc. (NYSE:FIS), with a stake worth $1349.6 million reported as of the end of March. Trailing Viking Global was Select Equity Group, which amassed a stake valued at $977.8 million. Cantillon Capital Management, Steadfast Capital Management, and Farallon Capital 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 Park Presidio Capital allocated the biggest weight to Fidelity National Information Services Inc. (NYSE:FIS), around 8.81% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, setting aside 7.51 percent of its 13F equity portfolio to FIS.
Seeing as Fidelity National Information Services Inc. (NYSE:FIS) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies who sold off their full holdings heading into Q2. At the top of the heap, Lone Pine Capital cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $396.1 million in stock, and Dan Loeb’s Third Point was right behind this move, as the fund dropped about $302.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 14 funds heading into Q2.
Let’s go over hedge fund activity in other stocks similar to Fidelity National Information Services Inc. (NYSE:FIS). We will take a look at Lam Research Corporation (NASDAQ:LRCX), S&P Global Inc. (NYSE:SPGI), Coupang, Inc. (NYSE:CPNG), Cigna Corporation (NYSE:CI), U.S. Bancorp (NYSE:USB), General Motors Company (NYSE:GM), and Mondelez International Inc (NASDAQ:MDLZ). This group of stocks’ market values are closest to FIS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LRCX | 54 | 3164975 | -2 |
| SPGI | 66 | 6245296 | -9 |
| CPNG | 40 | 21669289 | 40 |
| CI | 53 | 2497828 | -4 |
| USB | 43 | 8335231 | -17 |
| GM | 86 | 8053011 | 16 |
| MDLZ | 45 | 2845001 | -5 |
| Average | 55.3 | 7544376 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.3 hedge funds with bullish positions and the average amount invested in these stocks was $7544 million. That figure was $8251 million in FIS’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Coupang, Inc. (NYSE:CPNG) is the least popular one with only 40 bullish hedge fund positions. Fidelity National Information Services Inc. (NYSE:FIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIS is 48. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately FIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FIS were disappointed as the stock returned 3.9% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
