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Were Hedge Funds Right About Dumping Accenture Plc (ACN)?

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. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Accenture Plc (NYSE:ACN).

Is Accenture Plc (NYSE:ACN) the right pick for your portfolio? Prominent investors are getting less optimistic. The number of long hedge fund positions were cut by 4 recently. Our calculations also showed that ACN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). ACN was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 45 hedge funds in our database with ACN holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are plenty of gauges stock market investors employ to value their holdings. Two of the best gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best money managers can outpace their index-focused peers by a solid margin (see the details here).

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

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. Now let’s take a glance at the key hedge fund action surrounding Accenture Plc (NYSE:ACN).

How have hedgies been trading Accenture Plc (NYSE:ACN)?

At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in ACN over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Accenture Plc (NYSE:ACN). AQR Capital Management has a $304.9 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Rajiv Jain of GQG Partners, with a $212.7 million position; 1.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Accenture Plc (NYSE:ACN), around 8.2% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, dishing out 3.61 percent of its 13F equity portfolio to ACN.

Seeing as Accenture Plc (NYSE:ACN) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of money managers that decided to sell off their positions entirely heading into Q4. Intriguingly, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital cut the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $36.2 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also sold off its stock, about $23.7 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Accenture Plc (NYSE:ACN) but similarly valued. We will take a look at Philip Morris International Inc. (NYSE:PM), AbbVie Inc (NYSE:ABBV), AstraZeneca plc (NYSE:AZN), and Thermo Fisher Scientific Inc. (NYSE:TMO). This group of stocks’ market valuations resemble ACN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PM 57 3240766 -3
ABBV 71 5288422 3
AZN 32 1901127 4
TMO 73 3607687 3
Average 58.25 3509501 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.25 hedge funds with bullish positions and the average amount invested in these stocks was $3510 million. That figure was $1209 million in ACN’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 32 bullish hedge fund positions. Accenture Plc (NYSE:ACN) 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. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ACN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ACN investors were disappointed as the stock returned -27.3% 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 in Q1.

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

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