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In this article we will analyze whether FactSet Research Systems Inc. (NYSE:FDS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
FactSet Research Systems Inc. (NYSE:FDS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that FDS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Brookfield Renewable Partners L.P. (NYSE:BEP), Vedanta Ltd (NYSE:VEDL), and Equity Lifestyle Properties, Inc. (NYSE:ELS) to gather more data points.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 look at the key hedge fund action regarding FactSet Research Systems Inc. (NYSE:FDS).
Do Hedge Funds Think FDS Is A Good Stock To Buy Now?
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FDS over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Echo Street Capital Management held the most valuable stake in FactSet Research Systems Inc. (NYSE:FDS), which was worth $180.3 million at the end of the fourth quarter. On the second spot was Markel Gayner Asset Management which amassed $36 million worth of shares. Millennium Management, Two Sigma Advisors, 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 Echo Street Capital Management allocated the biggest weight to FactSet Research Systems Inc. (NYSE:FDS), around 1.61% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, designating 0.98 percent of its 13F equity portfolio to FDS.
Since FactSet Research Systems Inc. (NYSE:FDS) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of money managers that slashed their entire stakes by the end of the first quarter. Intriguingly, Peter Algert's Algert Global said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising about $1.2 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $1.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to FactSet Research Systems Inc. (NYSE:FDS). These stocks are Brookfield Renewable Partners L.P. (NYSE:BEP), Vedanta Ltd (NYSE:VEDL), Equity Lifestyle Properties, Inc. (NYSE:ELS), Black Knight, Inc. (NYSE:BKI), Invesco Ltd. (NYSE:IVZ), Erie Indemnity Company (NASDAQ:ERIE), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). All of these stocks' market caps match FDS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEP,24,223248,4 VEDL,10,85028,0 ELS,29,620521,5 BKI,40,821783,-4 IVZ,32,1240235,-2 ERIE,12,61677,5 JKHY,20,197513,-8 Average,23.9,464286,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $464 million. That figure was $355 million in FDS's case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 10 bullish hedge fund positions. FactSet Research Systems Inc. (NYSE:FDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FDS is 68.3. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on FDS, though not to the same extent, as the stock returned 10% since Q1 (through July 2nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.