If you are looking for the best ideas for your portfolio you may want to consider some of Wedgewood Partners top stock picks. Wedgewood Partners, an investment management firm, is bearish on Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is a technology company.
On July 16, 2019, Wedgewood Partners had released its Q2 2019 investor letter. The investment firm said that it sold Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock in Q2 2019. The stock has posted a return of 9.7% in the trailing one year period, underperforming the S&P 500 Index which returned 20.5% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock has risen by 8.5%.
Wedgewood Partners fund posted a return of 4.3% in the second quarter of 2019, in-line with the S&P 500 Index which also returned 4.3% in the same quarter. Let’s take a look at comments made by Wedgewood Partners about Cognizant Technology Solutions Corp (NASDAQ:CTSH) in the Q2 2019 investor letter.
“As a long-time holding, we liked Cognizant’s positioning as an IT and BP outsourcing service provider, adding value by helping companies simultaneously manage legacy IT business while ramping up investment in constantly emerging digital technologies. However, over the past few years there has been increasing turnover in Cognizant’s longer-term managerial ranks, and while the company continued to function smoothly, the recent handoff to the Company’s new CEO turned out to be more disruptive than we expected. Despite recently assuring shareholders that its value proposition and positioning were strong enough to drive high single-digit revenue growth along with margin expansion – a good recipe for doubledigit earnings growth – the Company came up well short of these expectations and are now outlining, in our view, vague plans to take up investments in building out consulting capacity while refocusing its selling and go-to-market strategy.
We agree with the Company that there are plenty of addressable market opportunities for Cognizant to capture, but we now think there will be a period of higher investment and lower top-line growth as it repositions to better compete relative to more integrated outsourcing and consulting service providers. Despite performing quite well over the years, we had trimmed Cognizant down to one of our smallest positions and decided to liquidate the remaining position in favor of opportunity elsewhere.”
In June, we had published an article revealing that Diamond Hill Capital is bullish about Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock. The investment firm supports the company’s steps to reaccelerate revenue growth.
In Q1 2020, the number of bullish hedge fund positions on Cognizant Technology Solutions Corp (NASDAQ:CTSH) stock decreased by about 12% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Cognizant’s downside potential. Our calculations showed that Cognizant Technology Solutions Corp (NASDAQ:CTSH) isn’t ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.