Paychex, Inc. (NASDAQ:PAYX) reported on Wednesday that its profits and revenues for the fiscal fourth quarter of the year increased helped by its new services in human resource. According to the payroll services firm, its profits for the just-ended quarter rose to $161.2 million, or $0.44 per share, from $145.9 million, or $0.40 per share, in the same quarter last year. Revenue climbed 8% versus the year-ago quarter to $692.2 million. Analysts were expecting earnings of $0.44 per share on revenues of $690 million. The stock moved to as high as $47.80 early today, up 1.96% from its close of $4.66 yesterday.
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It should be noted, however, that prominent investors are getting less optimistic about the stock. The number of bullish hedge fund bets dropped by four at the end of the first quarter. At the end of the initial quarter of 2015, a total of 21 of the hedge funds tracked by Insider Monkey were bullish in this stock, a 16% drop from the prior quarter. By March 31, total value of hedge fund holdings was $287.2 million, down 25.74% from the prior quarter’s $386.75 million. This is a major decline in value of holdings since the stock climbed a modest 7.46% from January 2 to March 31.
We pay attention to hedge funds’ moves because our research have shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks returned 135% since then and outperformed the S&P 500 Index by 80 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment. Plus, we also don’t like paying huge fees.
Insider Monkey also pays attention to insider trades, whether they are purchases or sales of stock, since these can tell us whether companies have the confidence of their senior management team members. Regarding Paychex, Inc., there were no insider purchase of shares with only minimal insider sales of shares, the most recent one being Director Grant Inman selling 6,753 shares on May 15. Because of this minimal activity, let’s take a look at the new hedge fund action regarding Paychex, Inc. in the next page.
What have hedge funds been doing with Paychex, Inc. (NASDAQ:PAYX)?
According to our database, Clint Carlson‘s Carlson Capital had the largest position in Paychex, Inc. (NASDAQ:PAYX), worth close to $89.6 million, accounting for 1% of its total 13F portfolio. The second most bullish hedge fund manager is Select Equity Group, managed by Robert Joseph Caruso, which held an $85.6 million position. The fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions comprise Robert Joseph Caruso’s Select Equity Group, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
Because Paychex, Inc. (NASDAQ:PAYX) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that elected to cut their positions entirely heading into Q2. At the top of the heap, John Overdeck and David Siegel‘s Two Sigma Advisors dropped the largest investment of all the hedgies monitored by Insider Monkey, 470,510 shares valued at approximately $21.7 million. Joel Greenblatt’s fund, Gotham Asset Management, also divested 132,130 shares, about $6.1 million worth. We really like Joel Greenblatt and seeing him dump the stock is a negative sign.
Due to the bearish sentiment of hedge funds as seen in the significant decrease in holdings value and the number of hedge funds among those we track which have long positions in the company, we wouldn’t recommend being long in Paychex, Inc. (NASDAQ:PAYX) at this moment.
Disclosure: None
