Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article, we analyze how these elite funds and prominent investors traded Conduent Incorporated (NASDAQ:CNDT) based on those filings.
Conduent Incorporated (NASDAQ:CNDT) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. CNDT has experienced a decrease in support from the world’s most elite money managers recently. There were 32 hedge funds in our database with CNDT positions at the end of the previous quarter. Our calculations also showed that CNDT 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.
Harold Levy of Iridian Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. 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. With all of this in mind we’re going to check out the recent hedge fund action surrounding Conduent Incorporated (NASDAQ:CNDT).
What does smart money think about Conduent Incorporated (NASDAQ:CNDT)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in CNDT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Conduent Incorporated (NASDAQ:CNDT) was held by Icahn Capital LP, which reported holding $236.5 million worth of stock at the end of September. It was followed by Iridian Asset Management with a $49.6 million position. Other investors bullish on the company included Paradice Investment Management, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Conduent Incorporated (NASDAQ:CNDT), around 2.24% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, setting aside 1.96 percent of its 13F equity portfolio to CNDT.
Due to the fact that Conduent Incorporated (NASDAQ:CNDT) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Michael A. Price and Amos Meron’s Empyrean Capital Partners dropped the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $13 million in stock, and David Rosen’s Rubric Capital Management was right behind this move, as the fund dropped about $6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Conduent Incorporated (NASDAQ:CNDT). We will take a look at Brookline Bancorp, Inc. (NASDAQ:BRKL), Canadian Solar Inc. (NASDAQ:CSIQ), Geopark Ltd (NYSE:GPRK), and Southwestern Energy Company (NYSE:SWN). This group of stocks’ market caps match CNDT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRKL | 11 | 66496 | 0 |
| CSIQ | 14 | 148220 | -4 |
| GPRK | 11 | 144211 | 3 |
| SWN | 15 | 149446 | 1 |
| Average | 12.75 | 127093 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $421 million in CNDT’s case. Southwestern Energy Company (NYSE:SWN) is the most popular stock in this table. On the other hand Brookline Bancorp, Inc. (NASDAQ:BRKL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Conduent Incorporated (NASDAQ:CNDT) is more popular among hedge funds. 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 and still beat the market by 12.9 percentage points. Unfortunately CNDT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CNDT were disappointed as the stock returned -61.6% during the four months of 2020 (through May 1st) 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.
