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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not ANSYS, Inc. (NASDAQ:ANSS) makes for a good investment right now.
Is ANSS a good stock to buy now? Hedge fund interest in ANSYS, Inc. (NASDAQ:ANSS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ANSS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Moderna, Inc. (NASDAQ:MRNA), Kinder Morgan Inc (NYSE:KMI), and Alcon Inc. (NYSE:ALC) to gather more data points.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Charles Akre of Akre Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let's review the new hedge fund action surrounding ANSYS, Inc. (NASDAQ:ANSS).
Do Hedge Funds Think ANSS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in ANSS 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.
The largest stake in ANSYS, Inc. (NASDAQ:ANSS) was held by Ako Capital, which reported holding $203.1 million worth of stock at the end of September. It was followed by Akre Capital Management with a $199.5 million position. Other investors bullish on the company included Select Equity Group, Alkeon Capital Management, and Impax Asset Management. In terms of the portfolio weights assigned to each position Crestwood Capital Management allocated the biggest weight to ANSYS, Inc. (NASDAQ:ANSS), around 7.08% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, earmarking 5.6 percent of its 13F equity portfolio to ANSS.
Judging by the fact that ANSYS, Inc. (NASDAQ:ANSS) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of money managers that elected to cut their full holdings heading into Q4. Interestingly, Stephen Yiu's Blue Whale Capital sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $5 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund said goodbye to about $2.9 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to ANSYS, Inc. (NASDAQ:ANSS). We will take a look at Moderna, Inc. (NASDAQ:MRNA), Kinder Morgan Inc (NYSE:KMI), Alcon Inc. (NYSE:ALC), Public Service Enterprise Group Incorporated (NYSE:PEG), Wayfair Inc (NYSE:W), Eni SpA (NYSE:E), and ING Groep N.V. (NYSE:ING). This group of stocks' market valuations are closest to ANSS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRNA,32,690338,-5 KMI,46,939696,-4 ALC,26,676140,5 PEG,23,406385,-8 W,40,4956036,-1 E,5,21869,-3 ING,9,279146,-4 Average,25.9,1138516,-2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $1139 million. That figure was $1456 million in ANSS's case. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. ANSYS, Inc. (NASDAQ:ANSS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ANSS is 77.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately ANSS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ANSS were disappointed as the stock returned 4.9% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.