Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Infosys Limited (NYSE:INFY).
Infosys Limited (NYSE:INFY) has seen an increase in support from the world’s most elite money managers recently. INFY was in 27 hedge funds’ portfolios at the end of March. There were 25 hedge funds in our database with INFY positions at the end of the previous quarter. Our calculations also showed that INFY 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the latest hedge fund action encompassing Infosys Limited (NYSE:INFY).
How are hedge funds trading Infosys Limited (NYSE:INFY)?
Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in INFY a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, GQG Partners held the most valuable stake in Infosys Limited (NYSE:INFY), which was worth $316.7 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $259 million worth of shares. AQR Capital Management, Polaris Capital Management, and LMR Partners 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 Dalton Investments allocated the biggest weight to Infosys Limited (NYSE:INFY), around 5.92% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 5.27 percent of its 13F equity portfolio to INFY.
As one would reasonably expect, key money managers have been driving this bullishness. Renaissance Technologies, created the most valuable position in Infosys Limited (NYSE:INFY). Renaissance Technologies had $23.9 million invested in the company at the end of the quarter. David Kowitz and Sheldon Kasowitz’s Indus Capital also made a $5.7 million investment in the stock during the quarter. The other funds with brand new INFY positions are Matthew Hulsizer’s PEAK6 Capital Management, Bruce Kovner’s Caxton Associates LP, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Infosys Limited (NYSE:INFY) but similarly valued. These stocks are Public Storage (NYSE:PSA), Autodesk, Inc. (NASDAQ:ADSK), Keurig Dr Pepper Inc. (NYSE:KDP), and Atlassian Corporation Plc (NASDAQ:TEAM). All of these stocks’ market caps match INFY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.25 hedge funds with bullish positions and the average amount invested in these stocks was $1639 million. That figure was $971 million in INFY’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Public Storage (NYSE:PSA) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Infosys Limited (NYSE:INFY) is even less popular than PSA. Hedge funds dodged a bullet by taking a bearish stance towards INFY. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately INFY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); INFY investors were disappointed as the stock returned 12.4% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.