The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Duck Creek Technologies, Inc. (NASDAQ:DCT).
Is DCT a good stock to buy now? The best stock pickers were getting more optimistic. The number of bullish hedge fund positions inched up by 21 lately. Duck Creek Technologies, Inc. (NASDAQ:DCT) was in 21 hedge funds' portfolios at the end of the third quarter of 2020. Our calculations also showed that DCT 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Alex Sacerdote of Whale Rock Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 take a look at the fresh hedge fund action surrounding Duck Creek Technologies, Inc. (NASDAQ:DCT).
Do Hedge Funds Think DCT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21 from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DCT over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Whale Rock Capital Management was the largest shareholder of Duck Creek Technologies, Inc. (NASDAQ:DCT), with a stake worth $102.1 million reported as of the end of September. Trailing Whale Rock Capital Management was Citadel Investment Group, which amassed a stake valued at $53.8 million. Point72 Asset Management, Tiger Global Management LLC, and Skye Global 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 Pinz Capital allocated the biggest weight to Duck Creek Technologies, Inc. (NASDAQ:DCT), around 0.7% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, setting aside 0.68 percent of its 13F equity portfolio to DCT.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Whale Rock Capital Management, managed by Alex Sacerdote, assembled the biggest position in Duck Creek Technologies, Inc. (NASDAQ:DCT). Whale Rock Capital Management had $102.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $53.8 million investment in the stock during the quarter. The following funds were also among the new DCT investors: Steve Cohen's Point72 Asset Management, Chase Coleman's Tiger Global Management LLC, and Jaime Sterne's Skye Global Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Duck Creek Technologies, Inc. (NASDAQ:DCT) but similarly valued. These stocks are American Financial Group, Inc. (NYSE:AFG), Ares Capital Corporation (NASDAQ:ARCC), RealPage, Inc. (NASDAQ:RP), CRISPR Therapeutics AG (NASDAQ:CRSP), Donaldson Company, Inc. (NYSE:DCI), PLDT Inc. (NYSE:PHI), and Darling Ingredients Inc. (NYSE:DAR). This group of stocks' market valuations are closest to DCT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AFG,27,278715,-1 ARCC,22,106925,3 RP,39,835449,0 CRSP,26,405098,-5 DCI,30,286675,3 PHI,8,95634,3 DAR,31,516814,6 Average,26.1,360759,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $223 million in DCT's case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 8 bullish hedge fund positions. Duck Creek Technologies, Inc. (NASDAQ:DCT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DCT is 43.5. 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 negative signal and 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 surpassed the market again by 15.8 percentage points. Unfortunately DCT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DCT investors were disappointed as the stock returned -10.2% 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.