Were Hedge Funds Right About Piling Into Fiserv, Inc. (FISV)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Fiserv, Inc. (NASDAQ:FISV) changed recently.

Fiserv, Inc. (NASDAQ:FISV) has experienced an increase in hedge fund sentiment in recent months. Fiserv, Inc. (NASDAQ:FISV) was in 85 hedge funds’ portfolios at the end of June. The all time high for this statistics is 80. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 67 hedge funds in our database with FISV positions at the end of the first quarter. Our calculations also showed that FISV isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to go over the fresh hedge fund action surrounding Fiserv, Inc. (NASDAQ:FISV).

How have hedgies been trading Fiserv, Inc. (NASDAQ:FISV)?

At the end of June, a total of 85 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FISV over the last 20 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Fiserv, Inc. (NASDAQ:FISV) was held by Melvin Capital Management, which reported holding $814.6 million worth of stock at the end of September. It was followed by Melvin Capital Management with a $524.2 million position. Other investors bullish on the company included Egerton Capital Limited, Citadel Investment Group, and Kensico Capital. In terms of the portfolio weights assigned to each position Toscafund Asset Management allocated the biggest weight to Fiserv, Inc. (NASDAQ:FISV), around 16.64% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, dishing out 11.51 percent of its 13F equity portfolio to FISV.

As industrywide interest jumped, some big names have been driving this bullishness. Maplelane Capital, managed by Leon Shaulov, initiated the most outsized position in Fiserv, Inc. (NASDAQ:FISV). Maplelane Capital had $168.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $112.9 million investment in the stock during the quarter. The other funds with new positions in the stock are James Parsons’s Junto Capital Management, Simon Sadler’s Segantii Capital, and Ravi Chopra’s Azora Capital.

Let’s now review hedge fund activity in other stocks similar to Fiserv, Inc. (NASDAQ:FISV). We will take a look at Booking Holdings Inc. (NASDAQ:BKNG), Zoetis Inc (NYSE:ZTS), VMware, Inc. (NYSE:VMW), Automatic Data Processing, Inc. (NASDAQ:ADP), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Canadian National Railway Company (NYSE:CNI), and Colgate-Palmolive Company (NYSE:CL). This group of stocks’ market values are similar to FISV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKNG 96 6098595 6
ZTS 58 1985007 -2
VMW 42 696435 15
ADP 49 1802478 3
REGN 49 1604372 7
CNI 28 2050472 2
CL 50 1699344 -3
Average 53.1 2276672 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.1 hedge funds with bullish positions and the average amount invested in these stocks was $2277 million. That figure was $4643 million in FISV’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 28 bullish hedge fund positions. Fiserv, Inc. (NASDAQ:FISV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FISV is 81.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately FISV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FISV were disappointed as the stock returned 3.7% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow Fiserv Inc (NASDAQ:FISV)

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