Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Accenture Plc (NYSE:ACN) was in 34 hedge funds’ portfolios at the end of September. ACN has experienced an increase in activity from the world’s largest hedge funds recently. There were 23 hedge funds in our database with ACN positions at the end of the previous quarter. Our calculations also showed that ACN isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s check out the recent hedge fund action encompassing Accenture Plc (NYSE:ACN).
What have hedge funds been doing with Accenture Plc (NYSE:ACN)?
Heading into the fourth quarter of 2018, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 48% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in ACN at the beginning of this year. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Accenture Plc (NYSE:ACN) was held by AQR Capital Management, which reported holding $265.8 million worth of stock at the end of September. It was followed by Praesidium Investment Management Company with a $154.1 million position. Other investors bullish on the company included Adage Capital Management, Arrowstreet Capital, and Gotham Asset Management.
Now, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Accenture Plc (NYSE:ACN). Arrowstreet Capital had $121.9 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $46.6 million investment in the stock during the quarter. The following funds were also among the new ACN investors: John Overdeck and David Siegel’s Two Sigma Advisors, David Costen Haley’s HBK Investments, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Accenture Plc (NYSE:ACN) but similarly valued. These stocks are British American Tobacco plc (NYSEAMEX:BTI), QUALCOMM, Incorporated (NASDAQ:QCOM), Texas Instruments Incorporated (NASDAQ:TXN), and Paypal Holdings Inc (NASDAQ:PYPL). All of these stocks’ market caps match ACN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BTI | 15 | 157231 | 2 |
| QCOM | 48 | 3172091 | 7 |
| TXN | 48 | 2380065 | 10 |
| PYPL | 97 | 4842898 | 11 |
| Average | 52 | 2638071 | 7.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $2.64 billion. That figure was $1.00 billion in ACN’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSEAMEX:BTI) is the least popular one with only 15 bullish hedge fund positions. Accenture Plc (NYSE:ACN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PYPL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
