Autodesk, Inc. (ADSK) vs. Hedge Fund Favorites in 2019

Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Autodesk, Inc. (NASDAQ:ADSK) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

Is Autodesk, Inc. (NASDAQ:ADSK) a buy right now? Investors who are in the know are in a pessimistic mood. The number of bullish hedge fund positions went down by 11 lately. Our calculations also showed that ADSK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Armitage Egerton Capital

John Armitage of Egerton Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s check out the fresh hedge fund action encompassing Autodesk, Inc. (NASDAQ:ADSK).

What does smart money think about Autodesk, Inc. (NASDAQ:ADSK)?

At Q3’s end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ADSK over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

The largest stake in Autodesk, Inc. (NASDAQ:ADSK) was held by Lone Pine Capital, which reported holding $665.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $261.7 million position. Other investors bullish on the company included Darsana Capital Partners, Egerton Capital Limited, and Steadfast Capital Management. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to Autodesk, Inc. (NASDAQ:ADSK), around 13.92% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, earmarking 9.17 percent of its 13F equity portfolio to ADSK.

Since Autodesk, Inc. (NASDAQ:ADSK) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers who were dropping their full holdings heading into Q4. Interestingly, Sculptor Capital dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $190 million in stock. Zach Schreiber’s fund, Point State Capital, also said goodbye to its stock, about $54.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 11 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Autodesk, Inc. (NASDAQ:ADSK). We will take a look at China Unicom (Hong Kong) Limited (NYSE:CHU), Shopify Inc (NYSE:SHOP), Equity Residential (NYSE:EQR), and Advanced Micro Devices, Inc. (NASDAQ:AMD). This group of stocks’ market valuations resemble ADSK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHU 8 65922 2
SHOP 34 2509650 8
EQR 23 196497 0
AMD 56 1135132 15
Average 30.25 976800 6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $977 million. That figure was $2728 million in ADSK’s case. Advanced Micro Devices, Inc. (NASDAQ:AMD) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 8 bullish hedge fund positions. Autodesk, Inc. (NASDAQ:ADSK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on ADSK as the stock returned 42.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.