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Do Hedge Funds and Insiders Love Cognizant Technology Solutions Corp (NASDAQ:CTSH)?

Is Cognizant Technology Solutions Corp (NASDAQ:CTSH) a buy here? Money managers are taking a pessimistic view. The number of bullish hedge fund positions went down by 3 lately.

In the eyes of most market participants, hedge funds are seen as unimportant, old financial vehicles of the past. While there are greater than 8000 funds with their doors open today, we choose to focus on the moguls of this group, around 450 funds. Most estimates calculate that this group has its hands on the majority of all hedge funds’ total asset base, and by watching their top investments, we have found a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Cognizant Technology Solutions Corp (NASDAQ:CTSH)Equally as important, optimistic insider trading sentiment is a second way to parse down the stock market universe. Obviously, there are a number of stimuli for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this tactic if you know where to look (learn more here).

With all of this in mind, let’s take a peek at the recent action surrounding Cognizant Technology Solutions Corp (NASDAQ:CTSH).

What have hedge funds been doing with Cognizant Technology Solutions Corp (NASDAQ:CTSH)?

At the end of the fourth quarter, a total of 30 of the hedge funds we track were bullish in this stock, a change of -9% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully.

According to our comprehensive database, Stephen Mandel’s Lone Pine Capital had the largest position in Cognizant Technology Solutions Corp (NASDAQ:CTSH), worth close to $806 million, accounting for 5.1% of its total 13F portfolio. Coming in second is William B. Gray of Orbis Investment Management, with a $240 million position; 0.5% of its 13F portfolio is allocated to the stock. Some other hedge funds with similar optimism include Alan Fournier’s Pennant Capital Management, James Crichton and Adam Weiss’s Scout Capital Management and Bill Miller’s Legg Mason Capital Management.

Seeing as Cognizant Technology Solutions Corp (NASDAQ:CTSH) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds who sold off their entire stakes in Q4. Intriguingly, Richard Schimel’s Diamondback Capital dumped the largest investment of all the hedgies we monitor, comprising about $15 million in stock.. James Dondero’s fund, Highland Capital Management, also dumped its stock, about $14 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds in Q4.

What have insiders been doing with Cognizant Technology Solutions Corp (NASDAQ:CTSH)?

Bullish insider trading is at its handiest when the company in focus has seen transactions within the past six months. Over the latest half-year time period, Cognizant Technology Solutions Corp (NASDAQ:CTSH) has experienced zero unique insiders buying, and 8 insider sales (see the details of insider trades here).

With the returns shown by Insider Monkey’s tactics, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Cognizant Technology Solutions Corp (NASDAQ:CTSH) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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