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Hedge Funds Are Dumping Aspen Technology, Inc. (AZPN)

Debasis Saha

In this article we will take a look at whether hedge funds think Aspen Technology, Inc. (NASDAQ:AZPN) 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 Aspen Technology, Inc. (NASDAQ:AZPN) a buy, sell, or hold? The smart money is becoming less confident. The number of bullish hedge fund bets went down by 17 lately. Our calculations also showed that AZPN 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_27266" align="aligncenter" width="400"] Ken Fisher of Fisher Asset Management[/caption]

Ken Fisher - FISHER ASSET MANAGEMENT

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Now we're going to take a look at the new hedge fund action encompassing Aspen Technology, Inc. (NASDAQ:AZPN).

How have hedgies been trading Aspen Technology, Inc. (NASDAQ:AZPN)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -46% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AZPN over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AZPN A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the number one position in Aspen Technology, Inc. (NASDAQ:AZPN). Alkeon Capital Management has a $165.1 million position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, which holds a $151.7 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Ryan Pedlow's Two Creeks Capital Management, Ken Fisher's Fisher Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Two Creeks Capital Management allocated the biggest weight to Aspen Technology, Inc. (NASDAQ:AZPN), around 10.25% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 5.15 percent of its 13F equity portfolio to AZPN.

Because Aspen Technology, Inc. (NASDAQ:AZPN) has witnessed falling interest from hedge fund managers, we can see that there lies a certain "tier" of money managers who sold off their positions entirely last quarter. Interestingly, Steve Cohen's Point72 Asset Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $49.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $47.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 17 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Aspen Technology, Inc. (NASDAQ:AZPN) but similarly valued. We will take a look at Regency Centers Corp (NYSE:REG), AptarGroup, Inc. (NYSE:ATR), PagSeguro Digital Ltd. (NYSE:PAGS), and Eastman Chemical Company (NYSE:EMN). This group of stocks' market valuations are similar to AZPN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REG,18,167065,2 ATR,20,156311,-5 PAGS,20,490881,-1 EMN,29,233593,-3 Average,21.75,261963,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $737 million in AZPN's case. Eastman Chemical Company (NYSE:EMN) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 18 bullish hedge fund positions. Aspen Technology, Inc. (NASDAQ:AZPN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately AZPN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AZPN investors were disappointed as the stock returned 6.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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