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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded EPAM Systems Inc (NYSE:EPAM) based on those filings.
Is EPAM stock a buy? EPAM Systems Inc (NYSE:EPAM) was in 32 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. EPAM investors should be aware of a decrease in enthusiasm from smart money of late. There were 33 hedge funds in our database with EPAM holdings at the end of September. Our calculations also showed that EPAM isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 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 124 percentage points since March 2017 (see the details here).
Richard Driehaus of Driehaus Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. 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. With all of this in mind we're going to take a peek at the new hedge fund action encompassing EPAM Systems Inc (NYSE:EPAM).
Do Hedge Funds Think EPAM Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EPAM over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in EPAM Systems Inc (NYSE:EPAM) was held by GQG Partners, which reported holding $219.5 million worth of stock at the end of December. It was followed by Driehaus Capital with a $70.5 million position. Other investors bullish on the company included Marshall Wace LLP, Hosking Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to EPAM Systems Inc (NYSE:EPAM), around 4.41% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, setting aside 3.49 percent of its 13F equity portfolio to EPAM.
Since EPAM Systems Inc (NYSE:EPAM) has faced declining sentiment from the smart money, it's safe to say that there is a sect of fund managers who sold off their entire stakes in the fourth quarter. Intriguingly, Hugh Sloane's Sloane Robinson Investment Management said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $3.6 million in stock. Greg Eisner's fund, Engineers Gate Manager, also dropped its stock, about $3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the fourth quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as EPAM Systems Inc (NYSE:EPAM) but similarly valued. These stocks are Trip.com Group Limited (NASDAQ:TCOM), Entergy Corporation (NYSE:ETR), AmerisourceBergen Corporation (NYSE:ABC), EXACT Sciences Corporation (NASDAQ:EXAS), Teradyne, Inc. (NYSE:TER), POSCO (NYSE:PKX), and Laboratory Corp. of America Holdings (NYSE:LH). This group of stocks' market valuations match EPAM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCOM,34,1667634,4 ETR,36,829666,9 ABC,47,681405,2 EXAS,40,1898594,6 TER,47,1417981,5 PKX,10,130115,-1 LH,66,1873964,9 Average,40,1214194,4.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1214 million. That figure was $617 million in EPAM's case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. EPAM Systems Inc (NYSE:EPAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EPAM is 52.7. 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 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 still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on EPAM as the stock returned 18.5% since the end of the fourth quarter (through 4/12) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.