The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Automatic Data Processing (NASDAQ:ADP) and determine whether the smart money was really smart about this stock.
Is Automatic Data Processing (NASDAQ:ADP) going to take off soon? Investors who are in the know were buying. The number of long hedge fund positions inched up by 2 recently. Automatic Data Processing (NASDAQ:ADP) was in 43 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 56. Our calculations also showed that ADP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s take a glance at the latest hedge fund action surrounding Automatic Data Processing (NASDAQ:ADP).
Do Hedge Funds Think ADP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards ADP over the last 25 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Fundsmith LLP held the most valuable stake in Automatic Data Processing (NASDAQ:ADP), which was worth $1418.7 million at the end of the third quarter. On the second spot was Cedar Rock Capital which amassed $457.2 million worth of shares. BlueSpruce Investments, GuardCap Asset Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Automatic Data Processing (NASDAQ:ADP), around 10.96% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 7.03 percent of its 13F equity portfolio to ADP.
As one would reasonably expect, key money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most outsized position in Automatic Data Processing (NASDAQ:ADP). Two Sigma Advisors had $123.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $96.5 million investment in the stock during the quarter. The following funds were also among the new ADP investors: Michael Rockefeller and KarláKroeker’s Woodline Partners, Mikal Patel’s Oribel Capital Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Automatic Data Processing (NASDAQ:ADP) but similarly valued. These stocks are Uber Technologies, Inc. (NYSE:UBER), Altria Group Inc (NYSE:MO), Brookfield Asset Management Inc. (NYSE:BAM), Mercadolibre Inc (NASDAQ:MELI), The Blackstone Group Inc. (NYSE:BX), PNC Financial Services Group Inc. (NYSE:PNC), and Equinor ASA (NYSE:EQNR). This group of stocks’ market caps resemble ADP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBER | 143 | 10766637 | 8 |
| MO | 45 | 829789 | -2 |
| BAM | 32 | 2498829 | -2 |
| MELI | 68 | 4371182 | -6 |
| BX | 54 | 2545773 | 0 |
| PNC | 41 | 506241 | 3 |
| EQNR | 11 | 163324 | 0 |
| Average | 56.3 | 3097396 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.3 hedge funds with bullish positions and the average amount invested in these stocks was $3097 million. That figure was $3616 million in ADP’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 bullish hedge fund positions. Automatic Data Processing (NASDAQ:ADP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ADP is 42.2. 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 gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on ADP as the stock returned 3.6% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
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Disclosure: None. This article was originally published at Insider Monkey.
