Hedge Funds Are Dumping ACI Worldwide Inc (ACIW)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ACI Worldwide Inc (NASDAQ:ACIW).

ACI Worldwide Inc (NASDAQ:ACIW) has experienced a decrease in hedge fund interest in recent months. ACI Worldwide Inc (NASDAQ:ACIW) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 30. There were 30 hedge funds in our database with ACIW holdings at the end of December. Our calculations also showed that ACIW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeff Smith

Jeffrey Smith of Starboard Value LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to check out the recent hedge fund action surrounding ACI Worldwide Inc (NASDAQ:ACIW).

Do Hedge Funds Think ACIW Is A Good Stock To Buy Now?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ACIW over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Starboard Value LP held the most valuable stake in ACI Worldwide Inc (NASDAQ:ACIW), which was worth $342 million at the end of the fourth quarter. On the second spot was Cardinal Capital which amassed $126.9 million worth of shares. P2 Capital Partners, TIG Advisors, and Clearfield Capital 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 Clearfield Capital allocated the biggest weight to ACI Worldwide Inc (NASDAQ:ACIW), around 9% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, earmarking 7.3 percent of its 13F equity portfolio to ACIW.

Since ACI Worldwide Inc (NASDAQ:ACIW) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Jerry Kochanski’s Shelter Haven Capital Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $17.6 million in stock, and Joseph Samuels’s Islet Management was right behind this move, as the fund dropped about $14.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ACI Worldwide Inc (NASDAQ:ACIW) but similarly valued. These stocks are VIZIO Holding Corp. (NYSE:VZIO), UMB Financial Corporation (NASDAQ:UMBF), Sterling Bancorp (NYSE:STL), Rayonier Inc. (NYSE:RYN), DigitalOcean Holdings, Inc. (NYSE:DOCN), Diversey Holdings, Ltd. (NASDAQ:DSEY), and Schneider National, Inc. (NYSE:SNDR). This group of stocks’ market valuations match ACIW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VZIO 19 126361 19
UMBF 13 106723 -7
STL 20 343567 1
RYN 18 428689 2
DOCN 22 197674 22
DSEY 21 284464 21
SNDR 19 127648 -1
Average 18.9 230732 8.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $687 million in ACIW’s case. DigitalOcean Holdings, Inc. (NYSE:DOCN) is the most popular stock in this table. On the other hand UMB Financial Corporation (NASDAQ:UMBF) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks ACI Worldwide Inc (NASDAQ:ACIW) is more popular among hedge funds. Our overall hedge fund sentiment score for ACIW is 71. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately ACIW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ACIW were disappointed as the stock returned -7.1% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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