Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Paylocity Holding Corp (NASDAQ:PCTY) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Paylocity Holding Corp (NASDAQ:PCTY) a bargain? Hedge funds are taking a pessimistic view. The number of bullish hedge fund bets decreased by 4 in recent months. Our calculations also showed that PCTY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). PCTY was in 26 hedge funds’ portfolios at the end of December. There were 30 hedge funds in our database with PCTY positions at the end of the previous quarter.
In the 21st century investor’s toolkit there are a large number of methods stock traders use to appraise their stock investments. A duo of the most useful methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a solid margin (see the details here).
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action regarding Paylocity Holding Corp (NASDAQ:PCTY).
How have hedgies been trading Paylocity Holding Corp (NASDAQ:PCTY)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the third quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in PCTY a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Paylocity Holding Corp (NASDAQ:PCTY) was held by Adams Street Partners, which reported holding $210 million worth of stock at the end of September. It was followed by Alkeon Capital Management with a $84.5 million position. Other investors bullish on the company included Zevenbergen Capital Investments, Echo Street Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Adams Street Partners allocated the biggest weight to Paylocity Holding Corp (NASDAQ:PCTY), around 42.89% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, designating 2.57 percent of its 13F equity portfolio to PCTY.
Seeing as Paylocity Holding Corp (NASDAQ:PCTY) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Renaissance Technologies cut the biggest investment of the 750 funds watched by Insider Monkey, worth about $28.1 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund dropped about $2.2 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Paylocity Holding Corp (NASDAQ:PCTY) but similarly valued. These stocks are American Campus Communities, Inc. (NYSE:ACC), Oshkosh Corporation (NYSE:OSK), Brixmor Property Group Inc (NYSE:BRX), and InterXion Holding NV (NYSE:INXN). All of these stocks’ market caps are closest to PCTY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACC | 21 | 342481 | -1 |
| OSK | 28 | 406897 | 2 |
| BRX | 16 | 147201 | -1 |
| INXN | 60 | 1328786 | 27 |
| Average | 31.25 | 556341 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $588 million in PCTY’s case. InterXion Holding NV (NYSE:INXN) is the most popular stock in this table. On the other hand Brixmor Property Group Inc (NYSE:BRX) is the least popular one with only 16 bullish hedge fund positions. Paylocity Holding Corp (NASDAQ:PCTY) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on PCTY, though not to the same extent, as the stock returned -25.1% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
