Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about ANSYS, Inc. (NASDAQ:ANSS) and compare its performance to hedge funds' consensus picks in 2019.
ANSYS, Inc. (NASDAQ:ANSS) was in 28 hedge funds' portfolios at the end of September. ANSS has experienced an increase in hedge fund sentiment of late. There were 25 hedge funds in our database with ANSS holdings at the end of the previous quarter. Our calculations also showed that ANSS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let's review the latest hedge fund action encompassing ANSYS, Inc. (NASDAQ:ANSS).
How are hedge funds trading ANSYS, Inc. (NASDAQ:ANSS)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in ANSS over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in ANSYS, Inc. (NASDAQ:ANSS) was held by Select Equity Group, which reported holding $355.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $86 million position. Other investors bullish on the company included Polar Capital, Intermede Investment Partners, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Crestwood Capital Management allocated the biggest weight to ANSYS, Inc. (NASDAQ:ANSS), around 7.4% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, dishing out 3.96 percent of its 13F equity portfolio to ANSS.
As industrywide interest jumped, key money managers have been driving this bullishness. Impax Asset Management, managed by Ian Simm, initiated the largest position in ANSYS, Inc. (NASDAQ:ANSS). Impax Asset Management had $51.4 million invested in the company at the end of the quarter. Dan Loeb's Third Point also made a $34.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Panayotis Takis Sparaggis's Alkeon Capital Management, Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, and Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks similar to ANSYS, Inc. (NASDAQ:ANSS). These stocks are Church & Dwight Co., Inc. (NYSE:CHD), Altice USA, Inc. (NYSE:ATUS), Cadence Design Systems Inc (NASDAQ:CDNS), and Fortis Inc. (NYSE:FTS). This group of stocks' market values are closest to ANSS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHD,34,543789,4 ATUS,51,3138068,6 CDNS,33,1579724,5 FTS,13,561241,1 Average,32.75,1455706,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1456 million. That figure was $883 million in ANSS's case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 13 bullish hedge fund positions. ANSYS, Inc. (NASDAQ:ANSS) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. A small number of hedge funds were also right about betting on ANSS as the stock returned 80.1% in 2019 and outclassed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.