Is Accenture Plc (ACN) Going to Burn These Hedge Funds?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Accenture Plc (NYSE:ACN) during the third quarter.

Accenture Plc (NYSE:ACN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 37 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare ACN to other stocks, including Lowe’s Companies, Inc. (NYSE:LOW), Costco Wholesale Corporation (NASDAQ:COST), and Inc (NASDAQ:PCLN) to get a better sense of its popularity.

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In today’s marketplace there are numerous gauges stock traders have at their disposal to size up stocks. A pair of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the market by a healthy amount (see the details here).

Keeping this in mind, let’s take a look at the fresh action surrounding Accenture Plc (NYSE:ACN).

What have hedge funds been doing with Accenture Plc (NYSE:ACN)?

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Accenture Plc (NYSE:ACN). Adage Capital Management has a $91.6 million position in the stock, comprising 0.3% of its 13F portfolio. On Adage Capital Management’s heels is AQR Capital Management, led by Cliff Asness, holding a $81.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Brian Ashford-Russell and Tim Woolley’s Polar Capital, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Accenture Plc (NYSE:ACN) has witnessed falling interest from the smart money, logic holds that there is a sect of hedgies that slashed their positions entirely in the third quarter. Interestingly, Matthew Tewksbury’s Stevens Capital Management sold off the largest position of the 700 funds monitored by Insider Monkey, worth about $14.3 million in call options.. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its call options., about $9.7 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Accenture Plc (NYSE:ACN). We will take a look at Lowe’s Companies, Inc. (NYSE:LOW), Costco Wholesale Corporation (NASDAQ:COST), Inc (NASDAQ:PCLN), and Barclays PLC (ADR) (NYSE:BCS). This group of stocks’ market values are closest to ACN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LOW 56 3349706 0
COST 38 1783917 -6
PCLN 86 7082014 15
BCS 15 324632 2

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $3.14 billion. That figure was $1.12 billion in ACN’s case. Inc (NASDAQ:PCLN) is the most popular stock in this table. On the other hand Barclays PLC (ADR) (NYSE:BCS) is the least popular one with only 15 bullish hedge fund positions. Accenture Plc (NYSE:ACN) 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. In this regard PCLN might be a better candidate to consider a long position.