At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ceridian HCM Holding Inc. (NYSE:CDAY).
Ceridian HCM Holding Inc. (NYSE:CDAY) was in 24 hedge funds' portfolios at the end of the first quarter of 2020. CDAY has experienced a decrease in enthusiasm from smart money recently. There were 31 hedge funds in our database with CDAY holdings at the end of the previous quarter. Our calculations also showed that CDAY isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_750227" align="aligncenter" width="392"] Alex Litowitz of Magnetar Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's check out the latest hedge fund action regarding Ceridian HCM Holding Inc. (NYSE:CDAY).
What have hedge funds been doing with Ceridian HCM Holding Inc. (NYSE:CDAY)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the fourth quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in CDAY a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in Ceridian HCM Holding Inc. (NYSE:CDAY), which was worth $520.9 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $162.5 million worth of shares. Ashe Capital, Whale Rock Capital Management, and Alkeon Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Ceridian HCM Holding Inc. (NYSE:CDAY), around 12.35% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, dishing out 3.59 percent of its 13F equity portfolio to CDAY.
Due to the fact that Ceridian HCM Holding Inc. (NYSE:CDAY) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of funds that elected to cut their entire stakes heading into Q4. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management cut the largest position of the 750 funds followed by Insider Monkey, comprising close to $19.5 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund dropped about $17 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ceridian HCM Holding Inc. (NYSE:CDAY) but similarly valued. We will take a look at Tenaris S.A. (NYSE:TS), Cloudflare, Inc. (NYSE:NET), CyrusOne Inc (NASDAQ:CONE), and Service Corporation International (NYSE:SCI). All of these stocks' market caps resemble CDAY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TS,15,212792,-1 NET,24,498974,2 CONE,31,317450,-1 SCI,30,398250,12 Average,25,356867,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $1189 million in CDAY's case. CyrusOne Inc (NASDAQ:CONE) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 15 bullish hedge fund positions. Ceridian HCM Holding Inc. (NYSE:CDAY) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on CDAY as the stock returned 54.5% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.