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Were Hedge Funds Right About Flocking Into FactSet Research Systems Inc. (FDS) ?

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2018. In this article we are going to take a look at smart money sentiment towards FactSet Research Systems Inc. (NYSE:FDS).

Is FactSet Research Systems Inc. (NYSE:FDS) a sound stock to buy now? Prominent investors are betting on the stock. The number of bullish hedge fund bets rose by 3 in recent months. Our calculations also showed that FDS isn’t among the 30 most popular stocks among hedge funds. FDS was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 17 hedge funds in our database with FDS holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Tom Gayner

Let’s analyze the recent hedge fund action encompassing FactSet Research Systems Inc. (NYSE:FDS).

How are hedge funds trading FactSet Research Systems Inc. (NYSE:FDS)?

Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in FDS a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

FDS

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in FactSet Research Systems Inc. (NYSE:FDS). Renaissance Technologies has a $98.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Markel Gayner Asset Management, managed by Tom Gayner, which holds a $23.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Greg Poole’s Echo Street Capital Management, Peter Seuss’s Prana Capital Management and Noam Gottesman’s GLG Partners.

As aggregate interest increased, specific money managers have jumped into FactSet Research Systems Inc. (NYSE:FDS) headfirst. Prana Capital Management, managed by Peter Seuss, established the largest position in FactSet Research Systems Inc. (NYSE:FDS). Prana Capital Management had $11.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1.8 million position during the quarter. The other funds with brand new FDS positions are Michael Gelband’s ExodusPoint Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Hoon Kim’s Quantinno Capital.

Let’s also examine hedge fund activity in other stocks similar to FactSet Research Systems Inc. (NYSE:FDS). We will take a look at VICI Properties Inc. (NYSE:VICI), Qorvo Inc (NASDAQ:QRVO), Allegion plc (NYSE:ALLE), and The Western Union Company (NYSE:WU). This group of stocks’ market valuations resemble FDS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VICI 38 2268877 -1
QRVO 28 1275628 0
ALLE 25 490844 10
WU 26 445968 6
Average 29.25 1120329 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1120 million. That figure was $202 million in FDS’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Allegion plc (NYSE:ALLE) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks FactSet Research Systems Inc. (NYSE:FDS) is even less popular than ALLE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on FDS as the stock returned 28.2% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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