Did Hedge Funds Make The Right Call On Amdocs Limited (DOX)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Amdocs Limited (NYSE:DOX) based on that data and determine whether they were really smart about the stock.

Amdocs Limited (NYSE:DOX) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. DOX was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with DOX positions at the end of the previous quarter. Our calculations also showed that DOX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are many indicators investors can use to assess their stock investments. Two of the most useful indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the broader indices by a very impressive margin (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s go over the fresh hedge fund action encompassing Amdocs Limited (NYSE:DOX).

What does smart money think about Amdocs Limited (NYSE:DOX)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DOX over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is DOX A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Amdocs Limited (NYSE:DOX), which was worth $150.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $89.3 million worth of shares. D E Shaw, Ariel Investments, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to Amdocs Limited (NYSE:DOX), around 1.42% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, dishing out 0.94 percent of its 13F equity portfolio to DOX.

Since Amdocs Limited (NYSE:DOX) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings by the end of the first quarter. Intriguingly, Sander Gerber’s Hudson Bay Capital Management cut the biggest position of the 750 funds tracked by Insider Monkey, worth about $6.6 million in stock, and Vikas Lunia’s Lunia Capital was right behind this move, as the fund dropped about $5.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Amdocs Limited (NYSE:DOX). We will take a look at WestRock Company (NYSE:WRK), Cognex Corporation (NASDAQ:CGNX), 58.com Inc (NYSE:WUBA), and ICON Public Limited Company (NASDAQ:ICLR). This group of stocks’ market valuations are similar to DOX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WRK 26 412009 -9
CGNX 16 153965 -8
WUBA 21 292533 0
ICLR 21 478396 2
Average 21 334226 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $444 million in DOX’s case. WestRock Company (NYSE:WRK) is the most popular stock in this table. On the other hand Cognex Corporation (NASDAQ:CGNX) is the least popular one with only 16 bullish hedge fund positions. Amdocs Limited (NYSE:DOX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately DOX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DOX were disappointed as the stock returned 11.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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