The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Manhattan Associates, Inc. (NASDAQ:MANH).
Is Manhattan Associates, Inc. (NASDAQ:MANH) undervalued? Investors who are in the know are taking a bearish view. The number of bullish hedge fund bets were cut by 1 lately. Our calculations also showed that MANH 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike this former hedge fund manager 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. Let's analyze the recent hedge fund action surrounding Manhattan Associates, Inc. (NASDAQ:MANH).
How have hedgies been trading Manhattan Associates, Inc. (NASDAQ:MANH)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MANH over the last 16 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Manhattan Associates, Inc. (NASDAQ:MANH) was held by RGM Capital, which reported holding $127.6 million worth of stock at the end of March. It was followed by AQR Capital Management with a $77.3 million position. Other investors bullish on the company included Royce & Associates, Arrowstreet Capital, and GLG Partners.
Since Manhattan Associates, Inc. (NASDAQ:MANH) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of hedgies that decided to sell off their entire stakes heading into Q3. Interestingly, Clint Carlson's Carlson Capital dropped the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $1.9 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund cut about $1.2 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks similar to Manhattan Associates, Inc. (NASDAQ:MANH). These stocks are Silicon Laboratories Inc. (NASDAQ:SLAB), The Wendy's Company (NASDAQ:WEN), Fluor Corporation (NYSE:FLR), and NewMarket Corporation (NYSE:NEU). All of these stocks' market caps are similar to MANH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLAB,18,73662,6 WEN,24,914976,-3 FLR,21,286630,-1 NEU,20,88622,-1 Average,20.75,340973,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $425 million in MANH's case. The Wendy's Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand Silicon Laboratories Inc.(NASDAQ:SLAB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Manhattan Associates, Inc. (NASDAQ:MANH) is even less popular than SLAB. Hedge funds clearly dropped the ball on MANH as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on MANH as the stock returned 16.4% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.