At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Paycom Software Inc (NYSE:PAYC).
Paycom Software Inc (NYSE:PAYC) was in 30 hedge funds’ portfolios at the end of March. PAYC investors should pay attention to an increase in hedge fund interest of late. There were 27 hedge funds in our database with PAYC positions at the end of the previous quarter. Our calculations also showed that PAYC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
If you’d ask most investors, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the elite of this group, around 850 funds. Most estimates calculate that this group of people administer most of the smart money’s total capital, and by keeping an eye on their first-class equity investments, Insider Monkey has discovered a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action regarding Paycom Software Inc (NYSE:PAYC).
How have hedgies been trading Paycom Software Inc (NYSE:PAYC)?
Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in PAYC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Paycom Software Inc (NYSE:PAYC) was held by Citadel Investment Group, which reported holding $57.2 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $51.6 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Diker Management allocated the biggest weight to Paycom Software Inc (NYSE:PAYC), around 6.55% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, dishing out 3.23 percent of its 13F equity portfolio to PAYC.
Now, key hedge funds have been driving this bullishness. Renaissance Technologies, established the most outsized position in Paycom Software Inc (NYSE:PAYC). Renaissance Technologies had $27.3 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $18.2 million position during the quarter. The other funds with new positions in the stock are Mark N. Diker’s Diker Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Frederick DiSanto’s Ancora Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Paycom Software Inc (NYSE:PAYC) but similarly valued. We will take a look at Steris Plc (NYSE:STE), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Rollins, Inc. (NYSE:ROL), and Alliant Energy Corporation (NYSE:LNT). This group of stocks’ market valuations are closest to PAYC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $726 million. That figure was $239 million in PAYC’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 25 bullish hedge fund positions. Paycom Software Inc (NYSE:PAYC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on PAYC as the stock returned 47.1% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.