Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Computer Programs & Systems, Inc. (NASDAQ:CPSI) investors should be aware of a decrease in enthusiasm from smart money of late. CPSI was in 12 hedge funds' portfolios at the end of June. There were 18 hedge funds in our database with CPSI holdings at the end of the previous quarter. Our calculations also showed that CPSI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are many indicators shareholders employ to appraise stocks. Two of the most useful indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the S&P 500 by a very impressive amount (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the fresh hedge fund action surrounding Computer Programs & Systems, Inc. (NASDAQ:CPSI).
Hedge fund activity in Computer Programs & Systems, Inc. (NASDAQ:CPSI)
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CPSI over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander's Millennium Management has the most valuable position in Computer Programs & Systems, Inc. (NASDAQ:CPSI), worth close to $7.8 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Marshall Wace LLP, led by Paul Marshall and Ian Wace, holding a $5.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish include D. E. Shaw's D E Shaw, Bernard Horn's Polaris Capital Management and Ken Griffin's Citadel Investment Group.
Seeing as Computer Programs & Systems, Inc. (NASDAQ:CPSI) has faced falling interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds who sold off their entire stakes by the end of the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, comprising about $4 million in call options. Israel Englander's fund, Millennium Management, also said goodbye to its call options, about $3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Computer Programs & Systems, Inc. (NASDAQ:CPSI) but similarly valued. We will take a look at Evolus, Inc. (NASDAQ:EOLS), Village Super Market, Inc. (NASDAQ:VLGEA), Old Second Bancorp Inc. (NASDAQ:OSBC), and Lands' End, Inc. (NASDAQ:LE). This group of stocks' market valuations resemble CPSI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EOLS,12,15398,6 VLGEA,8,45463,0 OSBC,12,34682,0 LE,12,71897,-2 Average,11,41860,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $28 million in CPSI's case. Evolus, Inc. (NASDAQ:EOLS) is the most popular stock in this table. On the other hand Village Super Market, Inc. (NASDAQ:VLGEA) is the least popular one with only 8 bullish hedge fund positions. Computer Programs & Systems, Inc. (NASDAQ:CPSI) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CPSI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CPSI were disappointed as the stock returned -18.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.