Giverny Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. You should check out Giverny Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Giverny Capital highlighted a few stocks and SS&C Technologies Inc (NASDAQ:SSNC) is one of them. SS&C is a financial technology company. Year-to-date, SS&C Technologies Inc (NASDAQ:SSNC) stock lost 5.99% and on May 22nd it had a closing price of $55.85. Here is what Giverny Capital said:
“SS&C is a founder-driven company that owns much of the software used by the investment industry to manage trading, client accounting, fund administration, transfer agency and other back office functions. Founder and CEO Bill Stone owns about 12.5% of the company. I remember the day at my old job when I realized that SS&C owned every service provider we used to run our business: our trading software, client accounting system, transfer agent, etc. I felt in me a little surge of both dread and greed!
What especially piques my interest is that while SS&C is very profitable, many of the banks offering custodian and other back office services have exited over the years. There is a shrinking pool of competitors, high barriers to entry in the form of regulation and required technology investment, and a relatively low cost to the end customer. I can say confidently that investment firms find it difficult to switch fund administrators or client accounting software. The result is that SS&C has a sticky user base and some pricing power. Skeptics posit that SS&C will struggle as active management declines, but Stone responds that SS&C is not paid based on assets under management but based on trading and transactions. Every financial transaction must be recorded. There is no sign that transaction volumes across mutual funds, hedge funds, private equity, banks, healthcare and other financial institutions are in decline. SS&C has grown its adjusted earnings per share at a 20% rate for the past decade yet typically trades at a discount to the S&P 500 multiple.”
In Q4 2019, the number of bullish hedge fund positions on SS&C Technologies Inc (NASDAQ:SSNC) stock increased by about 28% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with SSNC’s growth potential. Our calculations showed that SS&C Technologies Inc (NASDAQ:SSNC) isn’t among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. 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. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
