Did Hedge Funds Drop The Ball On Paylocity Holding Corporation (PCTY) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Paylocity Holding Corporation (NASDAQ:PCTY).

Paylocity Holding Corporation (NASDAQ:PCTY) has seen a decrease in support from the world’s most elite money managers of late. Our calculations also showed that PCTY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action regarding Paylocity Holding Corporation (NASDAQ:PCTY).

How are hedge funds trading Paylocity Holding Corporation (NASDAQ:PCTY)?

Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in PCTY a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with PCTY Positions

Of the funds tracked by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the number one position in Paylocity Holding Corporation (NASDAQ:PCTY), worth close to $78.5 million, corresponding to 0.3% of its total 13F portfolio. Coming in second is Greg Poole of Echo Street Capital Management, with a $48.3 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Renaissance Technologies and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Paylocity Holding Corporation (NASDAQ:PCTY), around 0.84% of its portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.82 percent of its 13F equity portfolio to PCTY.

Because Paylocity Holding Corp (NASDAQ:PCTY) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners cut the largest stake of the 750 funds followed by Insider Monkey, valued at about $6.3 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also cut its stock, about $1.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Paylocity Holding Corporation (NASDAQ:PCTY). We will take a look at Hudson Pacific Properties Inc (NYSE:HPP), HUYA Inc. (NYSE:HUYA), Clarivate Analytics Plc (NYSE:CCC), and Companhia Brasileira de Distribuicao (NYSE:CBD). All of these stocks’ market caps are similar to PCTY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HPP 24 260095 7
HUYA 21 361903 -1
CCC 38 686023 17
CBD 11 44794 0
Average 23.5 338204 5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $314 million in PCTY’s case. Clarivate Analytics Plc (NYSE:CCC) is the most popular stock in this table. On the other hand Companhia Brasileira de Distribuicao (NYSE:CBD) is the least popular one with only 11 bullish hedge fund positions. Paylocity Holding Corporation (NASDAQ:PCTY) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PCTY as the stock returned 25.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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