Hedge Funds Are Dumping Jack Henry & Associates, Inc. (JKHY)

In this article we will take a look at whether hedge funds think Jack Henry & Associates, Inc. (NASDAQ:JKHY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Jack Henry & Associates, Inc. (NASDAQ:JKHY) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Jack Henry & Associates, Inc. (NASDAQ:JKHY) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. There were 28 hedge funds in our database with JKHY positions at the end of the fourth quarter. Our calculations also showed that JKHY 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.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now let’s take a glance at the key hedge fund action regarding Jack Henry & Associates, Inc. (NASDAQ:JKHY).

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

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in JKHY a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Jack Henry & Associates, Inc. (NASDAQ:JKHY), which was worth $78.5 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $42.2 million worth of shares. Two Sigma Advisors, Renaissance Technologies, and Balyasny Asset Management 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 Sciencast Management allocated the biggest weight to Jack Henry & Associates, Inc. (NASDAQ:JKHY), around 0.28% of its 13F portfolio. Oribel Capital Management is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to JKHY.

Since Jack Henry & Associates, Inc. (NASDAQ:JKHY) has experienced falling interest from hedge fund managers, it’s easy to see that there exists a select few fund managers who were dropping their entire stakes in the first quarter. It’s worth mentioning that Greg Poole’s Echo Street Capital Management cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising about $46.4 million in stock. James Parsons’s fund, Junto Capital Management, also sold off its stock, about $23.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 8 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Jack Henry & Associates, Inc. (NASDAQ:JKHY). We will take a look at Nordson Corporation (NASDAQ:NDSN), Tapestry, Inc. (NYSE:TPR), Weibo Corp (NASDAQ:WB), GFL Environmental Inc. (NYSE:GFL), The Interpublic Group of Companies Inc (NYSE:IPG), Avalara, Inc. (NYSE:AVLR), and Allegion plc (NYSE:ALLE). All of these stocks’ market caps are similar to JKHY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NDSN 26 179502 5
TPR 50 1166145 1
WB 12 118275 -1
GFL 22 561202 4
IPG 29 709187 -9
AVLR 41 994280 -15
ALLE 27 969085 0
Average 29.6 671097 -2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $671 million. That figure was $198 million in JKHY’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 12 bullish hedge fund positions. Jack Henry & Associates, Inc. (NASDAQ:JKHY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JKHY is 26.9. 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 beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on JKHY, though not to the same extent, as the stock returned 13.5% since the end of Q1 (through July 16th) and outperformed the market.

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