Is Paychex, Inc. (NASDAQ:PAYX) an excellent investment now? Money managers are taking a bearish view. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience
To most investors, hedge funds are assumed to be unimportant, old financial tools of yesteryear. While there are over 8000 funds in operation at the moment, we choose to focus on the masters of this club, close to 450 funds. It is estimated that this group oversees the lion’s share of all hedge funds’ total capital, and by watching their top picks, we have figured out a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Equally as key, positive insider trading sentiment is a second way to break down the marketplace. Just as you’d expect, there are a variety of stimuli for an upper level exec to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several academic studies have demonstrated the impressive potential of this strategy if investors understand where to look (learn more here).
Keeping this in mind, we’re going to take a peek at the key action encompassing Paychex, Inc. (NASDAQ:PAYX).
What have hedge funds been doing with Paychex, Inc. (NASDAQ:PAYX)?
At year’s end, a total of 12 of the hedge funds we track were bullish in this stock, a change of 0% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably.
When looking at the hedgies we track, Robert Joseph Caruso’s Select Equity Group had the biggest position in Paychex, Inc. (NASDAQ:PAYX), worth close to $98.5 million, comprising 1.5% of its total 13F portfolio. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $14 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include David Harding’s Winton Capital Management, Ray Dalio’s Bridgewater Associates and Ken Griffin’s Citadel Investment Group.
Seeing as Paychex, Inc. (NASDAQ:PAYX) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their entire stakes at the end of the year. Interestingly, Ken Griffin’s Citadel Investment Group said goodbye to the largest stake of all the hedgies we monitor, valued at about $1.6 million in stock., and Louis Bacon of Moore Global Investments was right behind this move, as the fund cut about $1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How are insiders trading Paychex, Inc. (NASDAQ:PAYX)?
Bullish insider trading is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the latest 180-day time period, Paychex, Inc. (NASDAQ:PAYX) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to Paychex, Inc. (NASDAQ:PAYX). These stocks are On Assignment, Inc. (NYSE:ASGN), 51job, Inc. (ADR) (NASDAQ:JOBS), Team Health Holdings LLC (NYSE:TMH), Manpowergroup Inc (NYSE:MAN), and Robert Half International Inc. (NYSE:RHI). This group of stocks belong to the staffing & outsourcing services industry and their market caps match PAYX’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| On Assignment, Inc. (NYSE:ASGN) | 9 | 1 | 9 |
| 51job, Inc. (ADR) (NASDAQ:JOBS) | 6 | 0 | 0 |
| Team Health Holdings LLC (NYSE:TMH) | 22 | 0 | 2 |
| Manpowergroup Inc (NYSE:MAN) | 15 | 0 | 6 |
| Robert Half International Inc. (NYSE:RHI) | 22 | 0 | 1 |
With the returns shown by our research, retail investors should always watch hedge fund and insider trading activity, and Paychex, Inc. (NASDAQ:PAYX) is an important part of this process.
