Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about American Software, Inc. (NASDAQ:AMSWA) in this article.
American Software, Inc. (NASDAQ:AMSWA) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that AMSWA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 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_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the recent hedge fund action encompassing American Software, Inc. (NASDAQ:AMSWA).
What have hedge funds been doing with American Software, Inc. (NASDAQ:AMSWA)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the second quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in AMSWA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of American Software, Inc. (NASDAQ:AMSWA), with a stake worth $30.9 million reported as of the end of September. Trailing Renaissance Technologies was Cloverdale Capital Management, which amassed a stake valued at $17.2 million. Arrowstreet Capital, Royce & Associates, and Citadel Investment Group 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 Cloverdale Capital Management allocated the biggest weight to American Software, Inc. (NASDAQ:AMSWA), around 11.64% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to AMSWA.
As aggregate interest increased, some big names have jumped into American Software, Inc. (NASDAQ:AMSWA) headfirst. Citadel Investment Group, managed by Ken Griffin, established the biggest position in American Software, Inc. (NASDAQ:AMSWA). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace, David Harding's Winton Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as American Software, Inc. (NASDAQ:AMSWA) but similarly valued. These stocks are Mistras Group, Inc. (NYSE:MG), Hometrust Bancshares Inc (NASDAQ:HTBI), Vectrus Inc (NYSE:VEC), and Mechel PAO (NYSE:MTL). This group of stocks' market valuations resemble AMSWA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MG,14,44608,4 HTBI,10,69092,1 VEC,15,49982,3 MTL,2,1373,0 Average,10.25,41264,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $57 million in AMSWA's case. Vectrus Inc (NYSE:VEC) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 2 bullish hedge fund positions. American Software, Inc. (NASDAQ:AMSWA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AMSWA, though not to the same extent, as the stock returned 6% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.