Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding SS&C Technologies Holdings, Inc. (NASDAQ:SSNC).
SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) has experienced an increase in support from the world’s most elite money managers lately. SSNC was in 59 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 46 hedge funds in our database with SSNC positions at the end of the previous quarter. Our calculations also showed that SSNC 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).
William Von Mueffling of Cantillon Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 let’s take a glance at the new hedge fund action encompassing SS&C Technologies Holdings, Inc. (NASDAQ:SSNC).
Hedge fund activity in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)
At Q4’s end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in SSNC a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Cantillon Capital Management was the largest shareholder of SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), with a stake worth $254 million reported as of the end of September. Trailing Cantillon Capital Management was Alkeon Capital Management, which amassed a stake valued at $213 million. Select Equity Group, Southpoint Capital Advisors, and Citadel Investment Group 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 Harbor Spring Capital allocated the biggest weight to SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), around 11.15% of its 13F portfolio. General Equity Partners is also relatively very bullish on the stock, dishing out 8.91 percent of its 13F equity portfolio to SSNC.
As aggregate interest increased, key money managers have jumped into SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) headfirst. Eminence Capital, managed by Ricky Sandler, initiated the most valuable position in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). Eminence Capital had $102.7 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $52.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Renaissance Technologies, and Ben Gordon’s Blue Grotto Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) but similarly valued. We will take a look at Paycom Software Inc (NYSE:PAYC), Genuine Parts Company (NYSE:GPC), iQIYI, Inc. (NASDAQ:IQ), and The Liberty SiriusXM Group (NASDAQ:LSXMA). This group of stocks’ market caps match SSNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAYC | 27 | 385882 | -6 |
| GPC | 21 | 271270 | 0 |
| IQ | 18 | 1133592 | -5 |
| LSXMA | 50 | 1786071 | 9 |
| Average | 29 | 894204 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $894 million. That figure was $1996 million in SSNC’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand iQIYI, Inc. (NASDAQ:IQ) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) 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 lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately SSNC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SSNC were disappointed as the stock returned -16.4% during the three months of 2020 (through April 20th) 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.
