Open Text Corporation (OTEX): Are Hedge Funds Right About This Stock?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Open Text Corporation (NASDAQ:OTEX).

Open Text Corporation (NASDAQ:OTEX) was in 19 hedge funds’ portfolios at the end of September. OTEX has experienced an increase in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with OTEX positions at the end of the previous quarter. Our calculations also showed that otex isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We’re going to check out the recent hedge fund action encompassing Open Text Corporation (NASDAQ:OTEX).

Hedge fund activity in Open Text Corporation (NASDAQ:OTEX)

Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OTEX over the last 13 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with OTEX Positions

The largest stake in Open Text Corporation (NASDAQ:OTEX) was held by Blue Harbour Group, which reported holding $374.9 million worth of stock at the end of September. It was followed by Praesidium Investment Management Company with a $157.4 million position. Other investors bullish on the company included Arrowstreet Capital, Sunriver Management, and Two Sigma Advisors.

As one would reasonably expect, some big names were leading the bulls’ herd. Sunriver Management, managed by Will Cook, created the most outsized position in Open Text Corporation (NASDAQ:OTEX). Sunriver Management had $22.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $13.5 million investment in the stock during the quarter. The other funds with brand new OTEX positions are Jim Simons’s Renaissance Technologies, Jeffrey Talpins’s Element Capital Management, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Open Text Corporation (NASDAQ:OTEX) but similarly valued. We will take a look at BeiGene, Ltd. (NASDAQ:BGNE), Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), Duke Realty Corporation (NYSE:DRE), and Westinghouse Air Brake Technologies Corp (NYSE:WAB). All of these stocks’ market caps resemble OTEX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BGNE 23 3215879 2
JAZZ 29 1005592 2
DRE 16 343282 -6
WAB 18 600559 4
Average 21.5 1291328 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.29 billion. That figure was $759 million in OTEX’s case. Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 16 bullish hedge fund positions. Open Text Corporation (NASDAQ:OTEX) 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 JAZZ might be a better candidate to consider a long position.

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