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Hedge Funds Have Never Been This Bullish On Infosys Limited (INFY)

Does Infosys Limited (NYSE:INFY) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Infosys Limited (NYSE:INFY) has seen an increase in hedge fund sentiment recently. Our calculations also showed that INFY isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the key hedge fund action regarding Infosys Limited (NYSE:INFY).

How are hedge funds trading Infosys Limited (NYSE:INFY)?

At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in INFY over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

INFY_oct2019

Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Infosys Limited (NYSE:INFY), worth close to $414.6 million, amounting to 0.5% of its total 13F portfolio. On Fisher Asset Management’s heels is AQR Capital Management, led by Cliff Asness, holding a $261.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Bernard Horn’s Polaris Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Howard Marks’s Oaktree Capital Management.

As aggregate interest increased, key hedge funds were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the most valuable position in Infosys Limited (NYSE:INFY). LMR Partners had $86.4 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also made a $38.4 million investment in the stock during the quarter. The other funds with brand new INFY positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ernest Chow and Jonathan Howe’s Sensato Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Infosys Limited (NYSE:INFY) but similarly valued. We will take a look at HCA Healthcare Inc (NYSE:HCA), UBS Group AG (NYSE:UBS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Honda Motor Co Ltd (NYSE:HMC). This group of stocks’ market values match INFY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCA 51 3049357 0
UBS 14 796197 3
VRTX 40 2385510 -5
HMC 7 83951 -2
Average 28 1578754 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1579 million. That figure was $1152 million in INFY’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 7 bullish hedge fund positions. Infosys Limited (NYSE:INFY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on INFY as the stock returned 6.3% during the same time frame and outperformed the market by an even larger margin.

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

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