Here is What Hedge Funds Think About FactSet Research Systems Inc. (FDS)

Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about FactSet Research Systems Inc. (NYSE:FDS).

FactSet Research Systems Inc. (NYSE:FDS) has experienced an increase in activity from the world’s largest hedge funds in recent months. During the third quarter, the number of investors tracked by Insider Monkey bullish on the company inched up by one to 16. At the end of this article we will also compare FDS to other stocks including Nordstrom, Inc. (NYSE:JWN), Domino’s Pizza, Inc. (NYSE:DPZ), and News Corp (NASDAQ:NWSA) to get a better sense of its popularity.

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, let’s analyze the new action encompassing FactSet Research Systems Inc. (NYSE:FDS).

How have hedgies been trading FactSet Research Systems Inc. (NYSE:FDS)?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, up by 7% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in FDS heading into 2016. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Brian Bares’ Bares Capital Management holds the number one position in FactSet Research Systems Inc. (NYSE:FDS), having reported ownership of $82.7 million worth of stock, comprising 4.9% of its 13F portfolio, as of the end of September. The second most bullish fund manager is Robert Joseph Caruso’s Select Equity Group, with a $78.2 million position. Some other hedge funds and institutional investors that are bullish encompass Tom Gayner’s Markel Gayner Asset Management, Greg Poole’s Echo Street Capital Management, and Cliff Asness’ AQR Capital 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.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners assembled the largest position in FactSet Research Systems Inc. (NYSE:FDS). LMR Partners had $6.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $4.9 million investment in the stock during the quarter. The other funds with brand new FDS positions are Gregg Moskowitz’s Interval Partners, Simon Sadler’s Segantii Capital, and Paul Tudor Jones’ Tudor Investment Corp.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as FactSet Research Systems Inc. (NYSE:FDS) but similarly valued. These stocks are Nordstrom, Inc. (NYSE:JWN), Domino’s Pizza, Inc. (NYSE:DPZ), News Corp (NASDAQ:NWSA), and AerCap Holdings N.V. (NYSE:AER). This group of stocks’ market valuations are similar to FDS’s market valuation.

As you can see these stocks had an average of 32 investors with bullish positions and the average amount invested in these stocks was $938 million, which is higher than $280 million in FDS’s case. Domino’s Pizza, Inc. (NYSE:DPZ) is the most popular stock in this table. On the other hand Nordstrom, Inc. (NYSE:JWN) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks FactSet Research Systems Inc. (NYSE:FDS) is even less popular than Nordstrom, Inc. (NYSE:JWN). 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.

Disclosure: None