Was The Smart Money Right About Xerox Holdings Corporation (XRX)?

In this article we will take a look at whether hedge funds think Xerox Holdings Corporation (NYSE:XRX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Xerox Holdings Corporation (NYSE:XRX) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. XRX has seen a decrease in hedge fund sentiment of late. There were 41 hedge funds in our database with XRX holdings at the end of March. Our calculations also showed that XRX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the new hedge fund action surrounding Xerox Holdings Corporation (NYSE:XRX).

What have hedge funds been doing with Xerox Holdings Corporation (NYSE:XRX)?

At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in XRX 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 Xerox Holdings Corporation (NYSE:XRX) was held by Icahn Capital LP, which reported holding $358.6 million worth of stock at the end of June. It was followed by AQR Capital Management with a $96.4 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Xerox Holdings Corporation (NYSE:XRX), around 1.82% of its 13F portfolio. Falcon Edge Capital is also relatively very bullish on the stock, dishing out 1.25 percent of its 13F equity portfolio to XRX.

Due to the fact that Xerox Holdings Corporation (NYSE:XRX) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies who were dropping their full holdings heading into Q3. Interestingly, Kenneth Mario Garschina’s Mason Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $21.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $13.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Xerox Holdings Corporation (NYSE:XRX) but similarly valued. These stocks are Cohen & Steers, Inc. (NYSE:CNS), Energizer Holdings, Inc. (NYSE:ENR), SVMK Inc. (NASDAQ:SVMK), Stifel Financial Corp. (NYSE:SF), Ormat Technologies, Inc. (NYSE:ORA), Kirby Corporation (NYSE:KEX), and The Hain Celestial Group, Inc. (NASDAQ:HAIN). This group of stocks’ market caps match XRX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $679 million in XRX’s case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Xerox Holdings Corporation (NYSE:XRX) is more popular among hedge funds. Our overall hedge fund sentiment score for XRX is 72.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on XRX as the stock returned 15.2% since the end of June (through 10/30) 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.

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