Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Manhattan Associates, Inc. (NASDAQ:MANH) changed recently.
Is MANH a good stock to buy now? Manhattan Associates, Inc. (NASDAQ:MANH) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. MANH has experienced an increase in enthusiasm from smart money lately. There were 15 hedge funds in our database with MANH holdings at the end of June. Our calculations also showed that MANH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Manhattan Associates, Inc. (NASDAQ:MANH).
Do Hedge Funds Think MANH Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MANH over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, RGM Capital was the largest shareholder of Manhattan Associates, Inc. (NASDAQ:MANH), with a stake worth $77.7 million reported as of the end of September. Trailing RGM Capital was Royce & Associates, which amassed a stake valued at $71.1 million. AQR Capital Management, GLG Partners, and Renaissance Technologies 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 RGM Capital allocated the biggest weight to Manhattan Associates, Inc. (NASDAQ:MANH), around 4.36% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, designating 1.8 percent of its 13F equity portfolio to MANH.
Now, specific money managers have jumped into Manhattan Associates, Inc. (NASDAQ:MANH) headfirst. Shannon River Fund Management, managed by Spencer M. Waxman, assembled the largest position in Manhattan Associates, Inc. (NASDAQ:MANH). Shannon River Fund Management had $15 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.8 million position during the quarter. The other funds with brand new MANH positions are Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Manhattan Associates, Inc. (NASDAQ:MANH). We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), Huaneng Power International Inc (NYSE:HNP), Lincoln National Corporation (NYSE:LNC), Voya Financial Inc (NYSE:VOYA), Sealed Air Corporation (NYSE:SEE), Steel Dynamics, Inc. (NASDAQ:STLD), and MKS Instruments, Inc. (NASDAQ:MKSI). This group of stocks’ market valuations are closest to MANH’s market valuation.
|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 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $276 million in MANH’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 bullish hedge fund positions. Manhattan Associates, Inc. (NASDAQ:MANH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MANH is 57.7. 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. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately MANH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MANH investors were disappointed as the stock returned 3.6% since the end of September (through 12/14) 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 2020.
Disclosure: None. This article was originally published at Insider Monkey.