We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Accenture Plc (NYSE:ACN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Accenture Plc (NYSE:ACN) was in 41 hedge funds’ portfolios at the end of December. ACN shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 45 hedge funds in our database with ACN holdings at the end of the previous quarter. Our calculations also showed that ACN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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. 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 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Curtis Schenker of Scoggin
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the fresh hedge fund action regarding Accenture Plc (NYSE:ACN).
How have hedgies been trading Accenture Plc (NYSE:ACN)?
At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ACN over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Accenture Plc (NYSE:ACN) was held by AQR Capital Management, which reported holding $304.9 million worth of stock at the end of September. It was followed by GQG Partners with a $212.7 million position. Other investors bullish on the company included Adage Capital Management, Praesidium Investment Management Company, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Accenture Plc (NYSE:ACN), around 8.2% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, dishing out 3.61 percent of its 13F equity portfolio to ACN.
Since Accenture Plc (NYSE:ACN) has witnessed a decline in interest from the smart money, logic holds that there was a specific group of funds who sold off their positions entirely by the end of the third quarter. At the top of the heap, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital sold off the biggest stake of the 750 funds monitored by Insider Monkey, comprising about $36.2 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $23.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Accenture Plc (NYSE:ACN). These stocks are Philip Morris International Inc. (NYSE:PM), AbbVie Inc (NYSE:ABBV), AstraZeneca plc (NYSE:AZN), and Thermo Fisher Scientific Inc. (NYSE:TMO). This group of stocks’ market caps are closest to ACN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PM | 57 | 3240766 | -3 |
| ABBV | 71 | 5288422 | 3 |
| AZN | 32 | 1901127 | 4 |
| TMO | 73 | 3607687 | 3 |
| Average | 58.25 | 3509501 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 58.25 hedge funds with bullish positions and the average amount invested in these stocks was $3510 million. That figure was $1209 million in ACN’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 32 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. 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 gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately ACN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ACN investors were disappointed as the stock returned -13.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
