The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Amdocs Limited (NASDAQ:DOX).
Amdocs Limited (NASDAQ:DOX) has experienced a decrease in activity from the world’s largest hedge funds lately. DOX was in 23 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with DOX positions at the end of the previous quarter. Our calculations also showed that DOX 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing Amdocs Limited (NASDAQ:DOX).
How have hedgies been trading Amdocs Limited (NASDAQ:DOX)?
Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DOX over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cliff Asness’s AQR Capital Management has the most valuable position in Amdocs Limited (NASDAQ:DOX), worth close to $150.2 million, amounting to 0.3% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $89.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of D. E. Shaw’s D E Shaw, John W. Rogers’s Ariel Investments and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to Amdocs Limited (NASDAQ:DOX), around 1.42% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.94 percent of its 13F equity portfolio to DOX.
Judging by the fact that Amdocs Limited (NASDAQ:DOX) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few hedgies that elected to cut their positions entirely in the first quarter. It’s worth mentioning that Sander Gerber’s Hudson Bay Capital Management sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $6.6 million in stock. Vikas Lunia’s fund, Lunia Capital, also said goodbye to its stock, about $5.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds in the first quarter.
Let’s go over hedge fund activity in other stocks similar to Amdocs Limited (NASDAQ:DOX). We will take a look at WestRock Company (NYSE:WRK), Cognex Corporation (NASDAQ:CGNX), 58.com Inc (NYSE:WUBA), and ICON Public Limited Company (NASDAQ:ICLR). This group of stocks’ market caps match DOX’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 21 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $444 million in DOX’s case. WestRock Company (NYSE:WRK) is the most popular stock in this table. On the other hand Cognex Corporation (NASDAQ:CGNX) is the least popular one with only 16 bullish hedge fund positions. Amdocs Limited (NASDAQ:DOX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately DOX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DOX were disappointed as the stock returned 18.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.