At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Accenture Plc (NYSE:ACN) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Accenture Plc (NYSE:ACN) a healthy stock for your portfolio? The best stock pickers were taking a bullish view. The number of long hedge fund positions moved up by 8 in recent months. Our calculations also showed that ACN isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_340081" align="aligncenter" width="392"] Phill Gross of Adage Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a gander at the recent hedge fund action surrounding Accenture Plc (NYSE:ACN).
How have hedgies been trading Accenture Plc (NYSE:ACN)?
At Q1's end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in ACN a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the largest position in Accenture Plc (NYSE:ACN). AQR Capital Management has a $236.4 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Rajiv Jain of GQG Partners, with a $177.6 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Phill Gross and Robert Atchinson's Adage Capital Management, Kevin Oram and Peter Uddo's Praesidium Investment Management Company and Ken Griffin's 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 8.41% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, designating 6.19 percent of its 13F equity portfolio to ACN.
Now, some big names were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Accenture Plc (NYSE:ACN). Millennium Management had $21.4 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $16.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital, Steve Cohen's Point72 Asset Management, and Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Accenture Plc (NYSE:ACN) but similarly valued. These stocks are Charter Communications, Inc. (NASDAQ:CHTR), International Business Machines Corp. (NYSE:IBM), Union Pacific Corporation (NYSE:UNP), and Tesla Inc. (NASDAQ:TSLA). This group of stocks' market caps are closest to ACN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHTR,104,9914920,39 IBM,41,902956,-9 UNP,63,3442520,-2 TSLA,61,2124859,10 Average,67.25,4096314,9.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 67.25 hedge funds with bullish positions and the average amount invested in these stocks was $4096 million. That figure was $1003 million in ACN's case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand International Business Machines Corp. (NYSE:IBM) is the least popular one with only 41 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. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on ACN as the stock returned 32.1% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.