Was The Smart Money Right About Autodesk, Inc. (ADSK)?

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 Autodesk, Inc. (NASDAQ:ADSK)? The smart money sentiment can provide an answer to this question.

Autodesk, Inc. (NASDAQ:ADSK) investors should pay attention to a decrease in hedge fund sentiment in recent months. Autodesk, Inc. (NASDAQ:ADSK) was in 64 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 67. There were 66 hedge funds in our database with ADSK holdings at the end of March. Our calculations also showed that ADSK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David E. Shaw of D.E. Shaw

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding Autodesk, Inc. (NASDAQ:ADSK).

Do Hedge Funds Think ADSK Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 67 hedge funds with a bullish position in ADSK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Autodesk, Inc. (NASDAQ:ADSK) was held by Cantillon Capital Management, which reported holding $355.4 million worth of stock at the end of June. It was followed by Impax Asset Management with a $284.5 million position. Other investors bullish on the company included Melvin Capital Management, D E Shaw, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Autodesk, Inc. (NASDAQ:ADSK), around 14.21% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, setting aside 6.89 percent of its 13F equity portfolio to ADSK.

Due to the fact that Autodesk, Inc. (NASDAQ:ADSK) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers who sold off their entire stakes last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $97.2 million in stock. Brandon Haley’s fund, Holocene Advisors, also dropped its stock, about $66.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Autodesk, Inc. (NASDAQ:ADSK) but similarly valued. These stocks are The Southern Company (NYSE:SO), Air Products & Chemicals, Inc. (NYSE:APD), Analog Devices, Inc. (NASDAQ:ADI), Stellantis N.V. (NYSE:STLA), Banco Santander (Brasil) SA (NYSE:BSBR), Roku, Inc. (NASDAQ:ROKU), and Boston Scientific Corporation (NYSE:BSX). This group of stocks’ market valuations match ADSK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $2339 million. That figure was $3201 million in ADSK’s case. Analog Devices, Inc. (NASDAQ:ADI) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Autodesk, Inc. (NASDAQ:ADSK) is more popular among hedge funds. Our overall hedge fund sentiment score for ADSK is 81.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on ADSK as the stock returned 8.8% since the end of June (through 10/29) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.

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