It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Manhattan Associates, Inc. (NASDAQ:MANH).
Manhattan Associates, Inc. (NASDAQ:MANH) investors should pay attention to an increase in activity from the world's largest hedge funds lately. Our calculations also showed that MANH 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_189632" align="aligncenter" width="450"] David Harding of Winton Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the fresh hedge fund action regarding Manhattan Associates, Inc. (NASDAQ:MANH).
How are hedge funds trading Manhattan Associates, Inc. (NASDAQ:MANH)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MANH over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, RGM Capital was the largest shareholder of Manhattan Associates, Inc. (NASDAQ:MANH), with a stake worth $91 million reported as of the end of September. Trailing RGM Capital was AQR Capital Management, which amassed a stake valued at $83.4 million. Arrowstreet Capital, Royce & Associates, and GLG Partners 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 RGM Capital allocated the biggest weight to Manhattan Associates, Inc. (NASDAQ:MANH), around 6.06% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.5 percent of its 13F equity portfolio to MANH.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Winton Capital Management, managed by David Harding, established the biggest position in Manhattan Associates, Inc. (NASDAQ:MANH). Winton Capital Management had $2 million invested in the company at the end of the quarter. Guy Shahar's DSAM Partners also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Hoon Kim's Quantinno Capital, and Phil Frohlich's Prescott Group Capital Management.
Let's also examine hedge fund activity in other stocks similar to Manhattan Associates, Inc. (NASDAQ:MANH). These stocks are Berry Global Group Inc (NYSE:BERY), Oshkosh Corporation (NYSE:OSK), Paylocity Holding Corp (NASDAQ:PCTY), and Hudson Pacific Properties Inc (NYSE:HPP). All of these stocks' market caps are closest to MANH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BERY,39,1571093,-1 OSK,22,434865,-2 PCTY,25,313646,-3 HPP,24,260095,7 Average,27.5,644925,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $645 million. That figure was $440 million in MANH's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Oshkosh Corporation (NYSE:OSK) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Manhattan Associates, Inc. (NASDAQ:MANH) is even less popular than OSK. Hedge funds dodged a bullet by taking a bearish stance towards MANH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MANH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MANH investors were disappointed as the stock returned 3.5% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.