ANSYS, Inc. (ANSS): Are Hedge Funds Right About This Stock?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

One stock that saw an increase in popularity during the third quarter is ANSYS, Inc. (NASDAQ:ANSS). There were 24 funds in our database long the stock at the end of September, compared to 20 funds at the end of June. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Plains GP Holdings LP (NYSE:PAGP), Rite Aid Corporation (NYSE:RAD), and Marine Harvest ASA (NYSE:MHG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, we’re going to view the new action encompassing ANSYS, Inc. (NASDAQ:ANSS).

Hedge fund activity in ANSYS, Inc. (NASDAQ:ANSS)

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in ANSYS, Inc. (NASDAQ:ANSS), a change of 20% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in ANSS heading into 2016. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, David Blood and Al Gore’s Generation Investment Management has the largest position in ANSYS, Inc. (NASDAQ:ANSS), worth close to $328.7 million, accounting for 3.6% of its total 13F portfolio. On Generation Investment Management’s heels is Brian Bares’ Bares Capital Management, which holds a $90.8 million position; the fund has 5.4% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Robert Joseph Caruso’s Select Equity Group, Barry Dargan’s Intermede Investment Partners and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Israel Englander’s Millennium Management assembled the most outsized position in ANSYS, Inc. (NASDAQ:ANSS). Millennium Management had $22.7 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also made a $7.9 million investment in the stock during the quarter. The other funds with brand new ANSS positions are Andrew Sandler’s Sandler Capital Management, Ken Griffin’s Citadel Investment Group, and George Hall’s Clinton Group.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ANSYS, Inc. (NASDAQ:ANSS) but similarly valued. We will take a look at Plains GP Holdings LP (NYSE:PAGP), Rite Aid Corporation (NYSE:RAD), Marine Harvest ASA (NYSE:MHG), and Westar Energy Inc (NYSE:WR). This group of stocks’ market caps match ANSS’s market cap.

As you can see these stocks had an average of 27 funds with bullish positions and the average amount invested in these stocks was $651 million. That figure was $658 million in ANSS’s case. Rite Aid Corporation (NYSE:RAD) is the most popular stock in this table. On the other hand Marine Harvest ASA (NYSE:MHG) is the least popular one with only five investors holding long positions. ANSYS, Inc. (NASDAQ:ANSS) 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. In this regard Rite Aid Corporation (NYSE:RAD) might be a better candidate to consider taking a long position in.

Disclosure: none