“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Fidelity National Information Services Inc. (NYSE:FIS).
Fidelity National Information Services Inc. (NYSE:FIS) was in 36 hedge funds’ portfolios at the end of the third quarter of 2018. FIS shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 32 hedge funds in our database with FIS holdings at the end of the previous quarter. Our calculations also showed that FIS isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to analyze the new hedge fund action encompassing Fidelity National Information Services Inc. (NYSE:FIS).
What does the smart money think about Fidelity National Information Services Inc. (NYSE:FIS)?
At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2018. On the other hand, there were a total of 31 hedge funds with a bullish position in FIS at the beginning of this year. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Fidelity National Information Services Inc. (NYSE:FIS) was held by Cantillon Capital Management, which reported holding $464.1 million worth of stock at the end of September. It was followed by Cantillon Capital Management with a $464.1 million position. Other investors bullish on the company included D E Shaw, Farallon Capital, and Two Sigma Advisors.
As aggregate interest increased, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the biggest call position in Fidelity National Information Services Inc. (NYSE:FIS). Millennium Management had $27.3 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $20.9 million investment in the stock during the quarter. The other funds with brand new FIS positions are Glenn Russell Dubin’s Highbridge Capital Management, Jim O’Brien and Jonathan Dorfman’s Napier Park Global Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Fidelity National Information Services Inc. (NYSE:FIS) but similarly valued. We will take a look at Southwest Airlines Co. (NYSE:LUV), China Unicom (Hong Kong) Limited (NYSE:CHU), Halliburton Company (NYSE:HAL), and Manulife Financial Corporation (NYSE:MFC). This group of stocks’ market caps resemble FIS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LUV | 41 | 5209151 | 5 |
| CHU | 6 | 53534 | -3 |
| HAL | 39 | 789589 | -5 |
| MFC | 21 | 389083 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.61 billion. That figure was $1.95 billion in FIS’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LUV might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
