Here is What Hedge Funds Think About Tyler Technologies, Inc. (TYL)

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 Tyler Technologies, Inc. (NYSE:TYL) to find out whether there were any major changes in hedge funds’ views.

Tyler Technologies, Inc. (NYSE:TYL) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Tyler Technologies, Inc. (NYSE:TYL) was in 28 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 36. There were 32 hedge funds in our database with TYL positions at the end of the fourth quarter. Our calculations also showed that TYL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 take a look at the latest hedge fund action surrounding Tyler Technologies, Inc. (NYSE:TYL).

Do Hedge Funds Think TYL Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in TYL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TYL A Good Stock To Buy?

More specifically, Skye Global Management was the largest shareholder of Tyler Technologies, Inc. (NYSE:TYL), with a stake worth $129.1 million reported as of the end of March. Trailing Skye Global Management was Echo Street Capital Management, which amassed a stake valued at $116.3 million. Praesidium Investment Management Company, RGM Capital, and AQR Capital 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 Praesidium Investment Management Company allocated the biggest weight to Tyler Technologies, Inc. (NYSE:TYL), around 5.66% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, designating 2.5 percent of its 13F equity portfolio to TYL.

Because Tyler Technologies, Inc. (NYSE:TYL) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of fund managers who sold off their entire stakes in the first quarter. It’s worth mentioning that Brian Bares’s Bares Capital Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $32.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $4.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Tyler Technologies, Inc. (NYSE:TYL). We will take a look at TransUnion (NYSE:TRU), Wheaton Precious Metals Corp. (NYSE:WPM), ON Semiconductor Corporation (NASDAQ:ON), Quest Diagnostics Incorporated (NYSE:DGX), Bio-Rad Laboratories, Inc. (NYSE:BIO), Celanese Corporation (NYSE:CE), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks’ market caps are closest to TYL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRU 41 2289853 0
WPM 28 439920 -6
ON 41 1279457 -4
DGX 34 485336 -11
BIO 44 890995 2
CE 36 759047 3
PEAK 18 264899 -4
Average 34.6 915644 -2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $523 million in TYL’s case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Healthpeak Properties, Inc. (NYSE:PEAK) is the least popular one with only 18 bullish hedge fund positions. Tyler Technologies, Inc. (NYSE:TYL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TYL is 43.6. 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 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on TYL, though not to the same extent, as the stock returned 12.8% since the end of Q1 (through July 9th) and outperformed the market.

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