Is INFY Stock A Buy or Sell?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Infosys Limited (NYSE:INFY) based on that data.

Is INFY stock a buy? The best stock pickers were turning bullish. The number of bullish hedge fund bets rose by 1 recently. Infosys Limited (NYSE:INFY) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 27. Our calculations also showed that INFY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Bernard Horn of Polaris Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s check out the fresh hedge fund action regarding Infosys Limited (NYSE:INFY).

Do Hedge Funds Think INFY Is A Good Stock To Buy Now?

At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in INFY a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, GQG Partners was the largest shareholder of Infosys Limited (NYSE:INFY), with a stake worth $707.4 million reported as of the end of December. Trailing GQG Partners was Fisher Asset Management, which amassed a stake valued at $322.2 million. AQR Capital Management, Polaris Capital Management, and Oldfield Partners 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 Dalton Investments allocated the biggest weight to Infosys Limited (NYSE:INFY), around 9.11% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, setting aside 5.56 percent of its 13F equity portfolio to INFY.

Now, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, assembled the most valuable position in Infosys Limited (NYSE:INFY). Driehaus Capital had $20.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $3.1 million investment in the stock during the quarter. The other funds with brand new INFY positions are Donald Sussman’s Paloma Partners and Matthew Tewksbury’s Stevens Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Infosys Limited (NYSE:INFY) but similarly valued. We will take a look at Activision Blizzard, Inc. (NASDAQ:ATVI), China Petroleum & Chemical Corp (NYSE:SNP), U.S. Bancorp (NYSE:USB), Chubb Limited (NYSE:CB), BP plc (NYSE:BP), CSX Corporation (NASDAQ:CSX), and FedEx Corporation (NYSE:FDX). All of these stocks’ market caps are closest to INFY’s market cap.

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As you can see these stocks had an average of 48.3 hedge funds with bullish positions and the average amount invested in these stocks was $2788 million. That figure was $1755 million in INFY’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 13 bullish hedge fund positions. Infosys Limited (NYSE:INFY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INFY is 38.9. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately INFY wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); INFY investors were disappointed as the stock returned 7.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.