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Were Hedge Funds Right About Betting On Autodesk, Inc. (ADSK)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Autodesk, Inc. (NASDAQ:ADSK) and determine whether the smart money was really smart about this stock.

Is Autodesk, Inc. (NASDAQ:ADSK) a healthy stock for your portfolio? Money managers were getting more bullish. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that ADSK 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). ADSK was in 65 hedge funds’ portfolios at the end of the first quarter of 2020. There were 64 hedge funds in our database with ADSK positions at the end of the previous quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the recent hedge fund action encompassing Autodesk, Inc. (NASDAQ:ADSK).

What have hedge funds been doing with Autodesk, Inc. (NASDAQ:ADSK)?

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. By comparison, 57 hedge funds held shares or bullish call options in ADSK a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Lone Pine Capital held the most valuable stake in Autodesk, Inc. (NASDAQ:ADSK), which was worth $628.1 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $200.9 million worth of shares. D E Shaw, Two Sigma Advisors, and Darsana Capital 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 Marlowe Partners allocated the biggest weight to Autodesk, Inc. (NASDAQ:ADSK), around 12.76% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, earmarking 10.39 percent of its 13F equity portfolio to ADSK.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Governors Lane, managed by Isaac Corre, established the biggest position in Autodesk, Inc. (NASDAQ:ADSK). Governors Lane had $21.7 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $5.8 million investment in the stock during the quarter. The other funds with brand new ADSK positions are Joseph Samuels’s Islet Management, Paul Tudor Jones’s Tudor Investment Corp, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Autodesk, Inc. (NASDAQ:ADSK) but similarly valued. These stocks are Keurig Dr Pepper Inc. (NYSE:KDP), Atlassian Corporation Plc (NASDAQ:TEAM), Thomson Reuters Corporation (NYSE:TRI), and UBS Group AG (NYSE:UBS). All of these stocks’ market caps match ADSK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KDP 30 564764 4
TEAM 59 2586287 -3
TRI 22 330343 1
UBS 15 211262 1
Average 31.5 923164 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $923 million. That figure was $2598 million in ADSK’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand UBS Group AG (NYSE:UBS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Autodesk, Inc. (NASDAQ:ADSK) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on ADSK as the stock returned 50.2% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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