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Is Conduent Incorporated (CNDT) Going to Burn These Hedge Funds?

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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Conduent Incorporated (NASDAQ:CNDT).

Is Conduent Incorporated (NASDAQ:CNDT) going to take off soon? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions inched up by 5 in recent months. Conduent Incorporated (NASDAQ:CNDT) was in 22 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that CNDT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 17 hedge funds in our database with CNDT holdings at the end of December.

In today’s marketplace there are plenty of gauges stock market investors put to use to appraise stocks. A pair of the most under-the-radar gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top fund managers can beat their index-focused peers by a solid margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Carl Icahn - Icahn Capital Lp
Carl Icahn - Icahn Capital Lp

Carl Icahn of Icahn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a glance at the new hedge fund action surrounding Conduent Incorporated (NASDAQ:CNDT).

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

At the end of March, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in CNDT over the last 23 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Icahn Capital LP held the most valuable stake in Conduent Incorporated (NASDAQ:CNDT), which was worth $254.1 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $24.6 million worth of shares. Two Sigma Advisors, Renaissance Technologies, and Arrowstreet Capital 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 Rutabaga Capital Management allocated the biggest weight to Conduent Incorporated (NASDAQ:CNDT), around 1.39% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, dishing out 1.2 percent of its 13F equity portfolio to CNDT.

Consequently, key hedge funds have been driving this bullishness. Archon Capital Management, managed by Constantinos J. Christofilis, established the largest position in Conduent Incorporated (NASDAQ:CNDT). Archon Capital Management had $8.3 million invested in the company at the end of the quarter. Peter Schliemann's Rutabaga Capital Management also initiated a $3 million position during the quarter. The following funds were also among the new CNDT investors: Bill Miller's Miller Value Partners, Matthew Hulsizer's PEAK6 Capital Management, and Brandon Haley's Holocene Advisors.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Conduent Incorporated (NASDAQ:CNDT) but similarly valued. We will take a look at Frontline Ltd (NYSE:FRO), TriCo Bancshares (NASDAQ:TCBK), Pliant Therapeutics, Inc. (NASDAQ:PLRX), Mack Cali Realty Corp (NYSE:CLI), Marten Transport, Ltd (NASDAQ:MRTN), James River Group Holdings Ltd (NASDAQ:JRVR), and First Busey Corporation (NASDAQ:BUSE). This group of stocks' market caps resemble CNDT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRO,10,10550,4 TCBK,6,30823,-2 PLRX,9,261380,1 CLI,8,47258,-2 MRTN,18,64404,2 JRVR,14,92437,3 BUSE,13,38289,-2 Average,11.1,77877,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $361 million in CNDT's case. Marten Transport, Ltd (NASDAQ:MRTN) is the most popular stock in this table. On the other hand TriCo Bancshares (NASDAQ:TCBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Conduent Incorporated (NASDAQ:CNDT) is more popular among hedge funds. Our overall hedge fund sentiment score for CNDT is 74.7. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately CNDT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CNDT were disappointed as the stock returned 1.1% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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