Were Hedge Funds Right About ANSYS, Inc. (ANSS)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019.

Hedge fund interest in ANSYS, Inc. (NASDAQ:ANSS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ANSS to other stocks including Align Technology, Inc. (NASDAQ:ALGN), CoStar Group Inc (NASDAQ:CSGP), and Hartford Financial Services Group Inc (NYSE:HIG) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, We choose to focus on the crème de la crème of this club, around 850 funds. These money managers command the majority of the smart money’s total capital, and by observing their first-class stock picks, Insider Monkey has figured out a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Andrew Sandler of Sandler Capital Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind let’s go over the latest hedge fund action surrounding ANSYS, Inc. (NASDAQ:ANSS).

Hedge fund activity in ANSYS, Inc. (NASDAQ:ANSS)

At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2019. On the other hand, there were a total of 29 hedge funds with a bullish position in ANSS a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of ANSYS, Inc. (NASDAQ:ANSS), with a stake worth $416 million reported as of the end of September. Trailing Select Equity Group was Ako Capital, which amassed a stake valued at $220.3 million. Alkeon Capital Management, AQR Capital Management, and Intermede Investment Partners 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 Crestwood Capital Management allocated the biggest weight to ANSYS, Inc. (NASDAQ:ANSS), around 7.44% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, dishing out 4.74 percent of its 13F equity portfolio to ANSS.

Since ANSYS, Inc. (NASDAQ:ANSS) has experienced falling interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their full holdings in the third quarter. At the top of the heap, Nicolai Tangen’s Ako Capital sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth about $172.1 million in stock. Dan Loeb’s fund, Third Point, also dropped its stock, about $34.8 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to ANSYS, Inc. (NASDAQ:ANSS). These stocks are Align Technology, Inc. (NASDAQ:ALGN), CoStar Group Inc (NASDAQ:CSGP), Hartford Financial Services Group Inc (NYSE:HIG), and MSCI Inc (NYSE:MSCI). This group of stocks’ market valuations are similar to ANSS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALGN 40 2552526 1
CSGP 44 1729509 5
HIG 34 738852 -2
MSCI 42 729773 2
Average 40 1437665 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1438 million. That figure was $1348 million in ANSS’s case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand Hartford Financial Services Group Inc (NYSE:HIG) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks ANSYS, Inc. (NASDAQ:ANSS) is even less popular than HIG. Hedge funds dodged a bullet by taking a bearish stance towards ANSS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately ANSS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ANSS investors were disappointed as the stock returned -15.4% 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 so far in Q1.

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