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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards ACI Worldwide Inc (NASDAQ:ACIW).
Is ACI Worldwide Inc (NASDAQ:ACIW) a buy right now? The best stock pickers are becoming less hopeful. The number of long hedge fund positions were trimmed by 1 lately. Our calculations also showed that ACIW 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). ACIW was in 20 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with ACIW holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 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 latest hedge fund action encompassing ACI Worldwide Inc (NASDAQ:ACIW).
What have hedge funds been doing with ACI Worldwide Inc (NASDAQ:ACIW)?
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in ACIW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in ACI Worldwide Inc (NASDAQ:ACIW) was held by Cardinal Capital, which reported holding $179.2 million worth of stock at the end of September. It was followed by P2 Capital Partners with a $47.8 million position. Other investors bullish on the company included Wallace R. Weitz & Co., Fisher Asset Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to ACI Worldwide Inc (NASDAQ:ACIW), around 5.47% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, earmarking 3.51 percent of its 13F equity portfolio to ACIW.
Because ACI Worldwide Inc (NASDAQ:ACIW) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that elected to cut their full holdings heading into Q4. Interestingly, Craig C. Albert’s Sheffield Asset Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at close to $4.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $4.1 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to ACI Worldwide Inc (NASDAQ:ACIW). We will take a look at Enable Midstream Partners LP (NYSE:ENBL), Nomad Foods Limited Ordinary Shares (NYSE:NOMD), Dicks Sporting Goods Inc (NYSE:DKS), and Axon Enterprise, Inc. (NASDAQ:AAXN). This group of stocks’ market valuations match ACIW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENBL | 4 | 38682 | -1 |
| NOMD | 35 | 520278 | -5 |
| DKS | 26 | 515908 | 0 |
| AAXN | 25 | 355346 | 5 |
| Average | 22.5 | 357554 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $358 million. That figure was $330 million in ACIW’s case. Nomad Foods Limited Ordinary Shares (NYSE:NOMD) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. ACI Worldwide Inc (NASDAQ:ACIW) 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. 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately ACIW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACIW investors were disappointed as the stock returned -36.8% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
