There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Paylocity Holding Corp (NASDAQ:PCTY).
Paylocity Holding Corp (NASDAQ:PCTY) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 9 hedge funds in our database with PCTY holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as M/A-COM Technology Solutions Holdings (NASDAQ:MTSI), Matador Resources Co (NYSE:MTDR), and ACI Worldwide Inc (NASDAQ:ACIW) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in Paylocity Holding Corp (NASDAQ:PCTY)
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 44% from the second quarter of 2016. By comparison, 16 hedge funds held shares or bullish call options in PCTY heading into this year. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Weatherbie Capital, led by Matthew A. Weatherbie, holds the largest position in Paylocity Holding Corp (NASDAQ:PCTY). Weatherbie Capital has a $28.1 million position in the stock, comprising 3.5% of its 13F portfolio. The second most bullish fund manager is Greg Poole of Echo Street Capital Management, with a $9.8 million position. Other members of the smart money with similar optimism comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Chuck Royce’s Royce & Associates and Brian Ashford-Russell and Tim Woolley’s Polar Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, some big names have been driving this bullishness. Echo Street Capital Management, led by Greg Poole, initiated the most outsized position in Paylocity Holding Corp (NASDAQ:PCTY). Echo Street Capital Management had $9.8 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $4.1 million investment in the stock during the quarter. The other funds with brand new PCTY positions are Bruce Garelick’s Garelick Capital Partners, Israel Englander’s Millennium Management, and Jim Simons’ Renaissance Technologies.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Paylocity Holding Corp (NASDAQ:PCTY) but similarly valued. We will take a look at M/A-COM Technology Solutions Holdings (NASDAQ:MTSI), Matador Resources Co (NYSE:MTDR), ACI Worldwide Inc (NASDAQ:ACIW), and Nord Anglia Education Inc (NYSE:NORD). This group of stocks’ market valuations match PCTY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTSI | 15 | 56196 | 0 |
| MTDR | 13 | 65490 | 1 |
| ACIW | 11 | 158644 | -2 |
| NORD | 7 | 147106 | 1 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $72 million in PCTY’s case. M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) is the most popular stock in this table. On the other hand Nord Anglia Education Inc (NYSE:NORD) is the least popular one with only 7 bullish hedge fund positions. Paylocity Holding Corp (NASDAQ:PCTY) 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 MTSI might be a better candidate to consider taking a long position in.
Disclosure: None
