Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards EPAM Systems Inc (NYSE:EPAM) to find out whether there were any major changes in hedge funds’ views.
EPAM Systems Inc (NYSE:EPAM) investors should pay attention to a decrease in hedge fund sentiment of late. EPAM Systems Inc (NYSE:EPAM) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. There were 32 hedge funds in our database with EPAM holdings at the end of December. Our calculations also showed that EPAM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind we’re going to view the fresh hedge fund action regarding EPAM Systems Inc (NYSE:EPAM).
Do Hedge Funds Think EPAM Is A Good Stock To Buy Now?
At first quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the fourth quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in EPAM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in EPAM Systems Inc (NYSE:EPAM), worth close to $150.3 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Driehaus Capital, managed by Richard Driehaus, which holds a $94 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Jeremy Hosking’s Hosking Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to EPAM Systems Inc (NYSE:EPAM), around 4.59% of its 13F portfolio. Force Hill Capital Management is also relatively very bullish on the stock, earmarking 3.35 percent of its 13F equity portfolio to EPAM.
Due to the fact that EPAM Systems Inc (NYSE:EPAM) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies who sold off their full holdings heading into Q2. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $63.8 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $29.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q2.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as EPAM Systems Inc (NYSE:EPAM) but similarly valued. We will take a look at EXACT Sciences Corporation (NASDAQ:EXAS), Paycom Software Inc (NYSE:PAYC), Nokia Corporation (NYSE:NOK), Edison International (NYSE:EIX), McCormick & Company, Incorporated (NYSE:MKC), PPL Corporation (NYSE:PPL), and Equifax Inc. (NYSE:EFX). All of these stocks’ market caps are similar to EPAM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $1413 million. That figure was $424 million in EPAM’s case. Paycom Software Inc (NYSE:PAYC) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 21 bullish hedge fund positions. EPAM Systems Inc (NYSE:EPAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EPAM is 24.8. 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 still beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on EPAM as the stock returned 33% since the end of the first quarter (through 7/16) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.