Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Jack Henry & Associates, Inc. (NASDAQ:JKHY) based on that data.
Jack Henry & Associates, Inc. (NASDAQ:JKHY) shareholders have witnessed a decrease in hedge fund interest recently. Our calculations also showed that JKHY 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="399"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 Jack Henry & Associates, Inc. (NASDAQ:JKHY).
Hedge fund activity in Jack Henry & Associates, Inc. (NASDAQ:JKHY)
Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in JKHY a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Jack Henry & Associates, Inc. (NASDAQ:JKHY) was held by Echo Street Capital Management, which reported holding $50.8 million worth of stock at the end of September. It was followed by GLG Partners with a $28.9 million position. Other investors bullish on the company included Adage Capital Management, Junto Capital Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Jack Henry & Associates, Inc. (NASDAQ:JKHY), around 6.35% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, setting aside 1.89 percent of its 13F equity portfolio to JKHY.
Seeing as Jack Henry & Associates, Inc. (NASDAQ:JKHY) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers who were dropping their entire stakes in the first quarter. At the top of the heap, Renaissance Technologies said goodbye to the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $14.5 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund said goodbye to about $6.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Jack Henry & Associates, Inc. (NASDAQ:JKHY). These stocks are Omnicom Group Inc. (NYSE:OMC), Paycom Software Inc (NYSE:PAYC), Steris Plc (NYSE:STE), and CrowdStrike Holdings, Inc. (NASDAQ:CRWD). This group of stocks' market caps are similar to JKHY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OMC,31,327865,9 PAYC,30,239228,3 STE,35,554570,2 CRWD,65,1301564,17 Average,40.25,605807,7.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $277 million in JKHY's case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Paycom Software Inc (NYSE:PAYC) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Jack Henry & Associates, Inc. (NASDAQ:JKHY) is even less popular than PAYC. Hedge funds dodged a bullet by taking a bearish stance towards JKHY. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately JKHY wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); JKHY investors were disappointed as the stock returned 16.8% during the second quarter (through the end of May) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.