In this article we will take a look at whether hedge funds think EPAM Systems Inc (NYSE:EPAM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is EPAM Systems Inc (NYSE:EPAM) a buy right now? The best stock pickers are becoming less hopeful. The number of long hedge fund positions fell by 1 recently. Our calculations also showed that EPAM 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_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/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 we're going to take a glance at the key hedge fund action encompassing EPAM Systems Inc (NYSE:EPAM).
What does smart money think about EPAM Systems Inc (NYSE:EPAM)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in EPAM a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, GQG Partners, managed by Rajiv Jain, holds the number one position in EPAM Systems Inc (NYSE:EPAM). GQG Partners has a $137.3 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $82.8 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Jeremy Hosking's Hosking Partners, Cliff Asness's AQR Capital Management and James Parsons's Junto Capital Management. In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to EPAM Systems Inc (NYSE:EPAM), around 6.51% of its 13F portfolio. Prince Street Capital Management is also relatively very bullish on the stock, earmarking 6.22 percent of its 13F equity portfolio to EPAM.
Judging by the fact that EPAM Systems Inc (NYSE:EPAM) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few funds who were dropping their entire stakes heading into Q4. Interestingly, Renaissance Technologies said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $3.8 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to EPAM Systems Inc (NYSE:EPAM). These stocks are Hess Corporation (NYSE:HES), Discovery Inc. (NASDAQ:DISCA), GSX Techedu Inc. (NYSE:GSX), and KeyCorp (NYSE:KEY). All of these stocks' market caps are similar to EPAM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HES,28,253381,-6 DISCA,32,233387,-6 GSX,13,204210,3 KEY,43,348822,7 Average,29,259950,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $339 million in EPAM's case. KeyCorp (NYSE:KEY) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 13 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 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on EPAM as the stock returned 24.2% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.