Was The Smart Money Right About EPAM Systems Inc (EPAM)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of EPAM Systems Inc (NYSE:EPAM) based on that data and determine whether they were really smart about the stock.

Is EPAM Systems Inc (NYSE:EPAM) a buy here? The best stock pickers were getting more bullish. The number of bullish hedge fund bets increased by 9 lately. EPAM Systems Inc (NYSE:EPAM) was in 42 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EPAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let’s check out the new hedge fund action surrounding EPAM Systems Inc (NYSE:EPAM).

Richard Driehaus of Driehaus Capital

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

Heading into the fourth quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the second quarter of 2021. By comparison, 33 hedge funds held shares or bullish call options in EPAM a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in EPAM Systems Inc (NYSE:EPAM). Arrowstreet Capital has a $158.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $116.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Ken Griffin’s Citadel Investment Group, Richard Driehaus’s Driehaus Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to EPAM Systems Inc (NYSE:EPAM), around 4.88% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 1.83 percent of its 13F equity portfolio to EPAM.

As industrywide interest jumped, key hedge funds have jumped into EPAM Systems Inc (NYSE:EPAM) headfirst. D E Shaw, managed by D. E. Shaw, assembled the biggest position in EPAM Systems Inc (NYSE:EPAM). D E Shaw had $52.1 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $47.8 million position during the quarter. The other funds with brand new EPAM positions are Anand Parekh’s Alyeska Investment Group, Renaissance Technologies, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks similar to EPAM Systems Inc (NYSE:EPAM). We will take a look at Nasdaq, Inc. (NASDAQ:NDAQ), Cummins Inc. (NYSE:CMI), Barrick Gold Corporation (NYSE:GOLD), Rocket Companies, Inc. (NYSE:RKT), Mettler-Toledo International Inc. (NYSE:MTD), HubSpot Inc (NYSE:HUBS), and HP Inc. (NYSE:HPQ). All of these stocks’ market caps are closest to EPAM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1018 million. That figure was $946 million in EPAM’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Rocket Companies, Inc. (NYSE:RKT) is the least popular one with only 17 bullish hedge fund positions. EPAM Systems Inc (NYSE:EPAM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPAM is 80.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 3.6 percentage points. Unfortunately, EPAM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EPAM were disappointed as the stock returned -16.5% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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