Is Automatic Data Processing (ADP) A Good Stock To Buy Now?

Judging by the fact that Automatic Data Processing (NASDAQ:ADP) has experienced bearish sentiment from the smart money, it’s easy to see that there is a sect of hedge funds that slashed their positions entirely during the third quarter. It’s worth mentioning that First Eagle Investment Management dumped the biggest investment of the 700 funds monitored by Insider Monkey, valued at close to $180 million in call options. Ken Griffin’s fund, Citadel Investment Group, also dropped its call options, about $10.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Automatic Data Processing (NASDAQ:ADP). We will take a look at The Bank of New York Mellon Corporation (NYSE:BK), Kinder Morgan Inc (NYSE:KMI), Phillips 66 (NYSE:PSX), and Target Corporation (NYSE:TGT). All of these stocks’ market caps are closest to ADP’s market cap.

As you can see these stocks had an average of 43.5 hedge funds with bullish positions and the average amount invested in these stocks was $3.59 billion. That figure was $817 million in ADP’s case. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand Phillips 66 (NYSE:PSX) is the least popular one with only 29 bullish hedge fund positions. Automatic Data Processing (NASDAQ:ADP) is not the least popular stock in this group but hedge fund interest is still below average, as is the amount of money invested in it. Coupled with the dip in hedge fund ownership, this is a slightly negative signal, as we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KMI might be a better candidate to consider for a long position.

Disclosure: None