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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Conduent Incorporated (NASDAQ:CNDT).
Conduent Incorporated (NASDAQ:CNDT) was in 26 hedge funds' portfolios at the end of September. The all time high for this statistic is 45. CNDT has seen an increase in support from the world's most elite money managers lately. There were 23 hedge funds in our database with CNDT holdings at the end of June. Our calculations also showed that CNDT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we're going to take a gander at the fresh hedge fund action regarding Conduent Incorporated (NASDAQ:CNDT).
Joel Greenblatt of Gotham Asset Management
Do Hedge Funds Think CNDT Is A Good Stock To Buy Now?
At third quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNDT over the last 25 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Icahn Capital LP held the most valuable stake in Conduent Incorporated (NASDAQ:CNDT), which was worth $251.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $16.6 million worth of shares. D E Shaw, Renaissance Technologies, and Two Sigma Advisors 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 Provenire Capital allocated the biggest weight to Conduent Incorporated (NASDAQ:CNDT), around 1.71% of its 13F portfolio. Verdad Advisers is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to CNDT.
As industrywide interest jumped, key money managers were breaking ground themselves. Verdad Advisers, managed by Dan Rasmussen, created the most valuable position in Conduent Incorporated (NASDAQ:CNDT). Verdad Advisers had $1.7 million invested in the company at the end of the quarter. Hoon Kim's Quantinno Capital also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Joel Greenblatt's Gotham Asset Management, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's check out hedge fund activity in other stocks similar to Conduent Incorporated (NASDAQ:CNDT). These stocks are Volta Inc. (NYSE:VLTA), Sundial Growers Inc. (NASDAQ:SNDL), Dine Brands Global, Inc. (NYSE:DIN), Ladder Capital Corp (NYSE:LADR), Griffon Corporation (NYSE:GFF), Connect Biopharma Holdings Limited (NASDAQ:CNTB), and Customers Bancorp Inc (NYSE:CUBI). All of these stocks' market caps resemble CNDT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VLTA,17,91284,17 SNDL,7,8106,-3 DIN,28,246515,0 LADR,8,33183,-1 GFF,11,156613,1 CNTB,6,193035,-1 CUBI,20,100077,3 Average,13.9,118402,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $336 million in CNDT's case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Connect Biopharma Holdings Limited (NASDAQ:CNTB) is the least popular one with only 6 bullish hedge fund positions. Conduent Incorporated (NASDAQ:CNDT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNDT is 70.8. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately CNDT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CNDT were disappointed as the stock returned -19.1% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.