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 Insight Enterprises, Inc. (NASDAQ:NSIT) based on that data and determine whether they were really smart about the stock.
Is Insight Enterprises, Inc. (NASDAQ:NSIT) a safe investment today? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund positions retreated by 5 lately. Our calculations also showed that NSIT 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 15 largest gold producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the fresh hedge fund action surrounding Insight Enterprises, Inc. (NASDAQ:NSIT).
Hedge fund activity in Insight Enterprises, Inc. (NASDAQ:NSIT)
Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in NSIT 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.
More specifically, Royce & Associates was the largest shareholder of Insight Enterprises, Inc. (NASDAQ:NSIT), with a stake worth $20.9 million reported as of the end of September. Trailing Royce & Associates was Arrowstreet Capital, which amassed a stake valued at $12.1 million. Millennium Management, Citadel Investment Group, and Pzena Investment 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 Zebra Capital Management allocated the biggest weight to Insight Enterprises, Inc. (NASDAQ:NSIT), around 1.19% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.29 percent of its 13F equity portfolio to NSIT.
Judging by the fact that Insight Enterprises, Inc. (NASDAQ:NSIT) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their full holdings last quarter. At the top of the heap, Noam Gottesman’s GLG Partners dumped the largest investment of all the hedgies followed by Insider Monkey, comprising close to $11.3 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $4.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Insight Enterprises, Inc. (NASDAQ:NSIT). We will take a look at Holly Energy Partners, L.P. (NYSE:HEP), Taylor Morrison Home Corp (NYSE:TMHC), AssetMark Financial Holdings, Inc. (NYSE:AMK), and Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS). This group of stocks’ market valuations are similar to NSIT’s market valuation.
|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 14 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $65 million in NSIT’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 4 bullish hedge fund positions. Insight Enterprises, Inc. (NASDAQ:NSIT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately NSIT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NSIT investors were disappointed as the stock returned 14.5% during the second quarter 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.