Hedge Funds Are Crazy About ANSYS, Inc. (ANSS)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of ANSYS, Inc. (NASDAQ:ANSS).

Is ANSYS, Inc. (NASDAQ:ANSS) undervalued? Investors who are in the know are buying. The number of long hedge fund positions went up by 3 in recent months. 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 IHS Inc. (NYSE:IHS), Polaris Industries Inc. (NYSE:PII), and Unum Group (NYSE:UNM) to gather more data points.

Follow Ansys Inc (NASDAQ:ANSS)

In today’s marketplace, there are plenty of gauges market participants can use to assess their holdings. A couple of the most innovative gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outperform the broader indices by a solid margin (see the details here).

Keeping this in mind, we’re going to review the key action regarding ANSYS, Inc. (NASDAQ:ANSS).

What have hedge funds been doing with ANSYS, Inc. (NASDAQ:ANSS)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 18% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the most valuable position in ANSYS, Inc. (NASDAQ:ANSS), worth close to $258.5 million, corresponding to 3.7% of its total 13F portfolio. Coming in second is Select Equity Group, led by Robert Joseph Caruso, holding a $78.6 million position; 0.7% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism consist of Brian Bares’ Bares Capital Management, Chuck Royce’s Royce & Associates, and Charles Akre’s Akre Capital Management.

As industrywide interest jumped, key money managers have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, created the biggest position in ANSYS, Inc. (NASDAQ:ANSS). Bridgewater Associates had $0.9 million invested in the company at the end of the quarter. George Hall’s Clinton Group also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to ANSYS, Inc. (NASDAQ:ANSS). We will take a look at IHS Inc. (NYSE:IHS), Polaris Industries Inc. (NYSE:PII), Unum Group (NYSE:UNM), and Goodyear Tire & Rubber Company (NASDAQ:GT). All of these stocks’ market caps resemble ANSYS, Inc. (NASDAQ:ANSS)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IHS 25 874968 6
PII 20 401145 0
UNM 28 364047 0
GT 36 1707910 -6

As you can see, these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $837 million. That figure was $428 million in ANSYS, Inc. (NASDAQ:ANSS)’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand, Polaris Industries Inc. (NYSE:PII) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks, ANSYS, Inc. (NASDAQ:ANSS) is even less popular than Polaris Industries Inc. (NYSE:PII). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.