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 Insight Enterprises, Inc. (NASDAQ:NSIT)? The smart money sentiment can provide an answer to this question.
Insight Enterprises, Inc. (NASDAQ:NSIT) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that NSIT isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the latest hedge fund action regarding Insight Enterprises, Inc. (NASDAQ:NSIT).
What have hedge funds been doing with Insight Enterprises, Inc. (NASDAQ:NSIT)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the first quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in NSIT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Insight Enterprises, Inc. (NASDAQ:NSIT), with a stake worth $31 million reported as of the end of March. Trailing Royce & Associates was Arrowstreet Capital, which amassed a stake valued at $23.3 million. Pzena Investment Management, GLG Partners, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Insight Enterprises, Inc. (NASDAQ:NSIT) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies that slashed their full holdings heading into Q3. Intriguingly, Ken Griffin’s Citadel Investment Group said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $3.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $1.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to Insight Enterprises, Inc. (NASDAQ:NSIT). We will take a look at InterDigital, Inc. (NASDAQ:IDCC), Centennial Resource Development, Inc. (NASDAQ:CDEV), GreenSky, Inc. (NASDAQ:GSKY), and Cal-Maine Foods Inc (NASDAQ:CALM). This group of stocks’ market values match NSIT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IDCC | 16 | 224039 | 0 |
| CDEV | 17 | 142786 | 2 |
| GSKY | 20 | 89452 | 5 |
| CALM | 16 | 182069 | 0 |
| Average | 17.25 | 159587 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $122 million in NSIT’s case. GreenSky, Inc. (NASDAQ:GSKY) is the most popular stock in this table. On the other hand InterDigital, Inc. (NASDAQ:IDCC) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Insight Enterprises, Inc. (NASDAQ:NSIT) is even less popular than IDCC. Hedge funds dodged a bullet by taking a bearish stance towards NSIT. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NSIT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NSIT investors were disappointed as the stock returned -4.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
