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Is ACIW Stock A Buy or Sell?

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Asma UL Husna
·6 min read
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Is ACI Worldwide Inc (NASDAQ:ACIW) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is ACIW stock a buy? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund bets moved up by 1 recently. ACI Worldwide Inc (NASDAQ:ACIW) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ACIW isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 29 hedge funds in our database with ACIW holdings at the end of September.

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeff Smith
Jeff Smith

Jeffrey Smith of Starboard Value LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind we're going to go over the key hedge fund action surrounding ACI Worldwide Inc (NASDAQ:ACIW).

Do Hedge Funds Think ACIW Is A Good Stock To Buy Now?

At the end of December, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in ACIW a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Jeffrey Smith's Starboard Value LP has the largest position in ACI Worldwide Inc (NASDAQ:ACIW), worth close to $371.5 million, comprising 9.4% of its total 13F portfolio. On Starboard Value LP's heels is Amy Minella of Cardinal Capital, with a $125.9 million position; 3.7% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include Claus Moller's P2 Capital Partners, Wallace Weitz's Wallace R. Weitz & Co. and Philip Hilal's Clearfield Capital. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to ACI Worldwide Inc (NASDAQ:ACIW), around 13.07% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, earmarking 9.45 percent of its 13F equity portfolio to ACIW.

Consequently, key hedge funds were breaking ground themselves. Shelter Haven Capital Management, managed by Jerry Kochanski, assembled the largest position in ACI Worldwide Inc (NASDAQ:ACIW). Shelter Haven Capital Management had $17.6 million invested in the company at the end of the quarter. Joseph Samuels's Islet Management also made a $14.4 million investment in the stock during the quarter. The other funds with brand new ACIW positions are Kenneth Squire's 13D Management, Allon Hellmann's Full18 Capital, and Matthew Hulsizer's PEAK6 Capital Management.

Let's also examine hedge fund activity in other stocks similar to ACI Worldwide Inc (NASDAQ:ACIW). We will take a look at Nomad Foods Limited (NYSE:NOMD), Acadia Healthcare Company Inc (NASDAQ:ACHC), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Acuity Brands, Inc. (NYSE:AYI), Evercore Inc. (NYSE:EVR), and Lazard Ltd (NYSE:LAZ). This group of stocks' market caps resemble ACIW's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOMD,28,385214,-3 ACHC,29,517678,5 ARNA,39,895131,-4 RETA,24,359598,-1 AYI,29,810405,-9 EVR,28,297535,1 LAZ,20,701466,1 Average,28.1,566718,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $567 million. That figure was $722 million in ACIW's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 20 bullish hedge fund positions. ACI Worldwide Inc (NASDAQ:ACIW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACIW is 62.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately ACIW wasn't nearly as popular as these 30 stocks and hedge funds that were betting on ACIW were disappointed as the stock returned 5.1% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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