At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Open Text Corporation (NASDAQ:OTEX) makes for a good investment right now.
Is OTEX a good stock to buy? Open Text Corporation (NASDAQ:OTEX) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. OTEX shareholders have witnessed an increase in hedge fund interest in recent months. There were 18 hedge funds in our database with OTEX holdings at the end of June. Our calculations also showed that OTEX isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's view the new hedge fund action encompassing Open Text Corporation (NASDAQ:OTEX).
Do Hedge Funds Think OTEX Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in OTEX a year ago. 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 Insider Monkey's hedge fund database, Kevin Oram and Peter Uddo's Praesidium Investment Management Company has the number one position in Open Text Corporation (NASDAQ:OTEX), worth close to $75.5 million, accounting for 4.5% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $32.4 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish consist of Noam Gottesman's GLG Partners, Renaissance Technologies and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Open Text Corporation (NASDAQ:OTEX), around 4.51% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to OTEX.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Open Text Corporation (NASDAQ:OTEX). Marshall Wace LLP had $1.5 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Mika Toikka's AlphaCrest Capital Management, Peter Muller's PDT Partners, and Matthew Hulsizer's PEAK6 Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Open Text Corporation (NASDAQ:OTEX) but similarly valued. These stocks are Whirlpool Corporation (NYSE:WHR), Teledyne Technologies Incorporated (NYSE:TDY), Booz Allen Hamilton Holding Corporation (NYSE:BAH), Autohome Inc (NYSE:ATHM), Natura &Co Holding S.A. (NYSE:NTCO), The Liberty SiriusXM Group (NASDAQ:LSXMA), and Cable One Inc (NYSE:CABO). This group of stocks' market valuations resemble OTEX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WHR,28,1212823,2 TDY,31,343280,-3 BAH,31,266718,6 ATHM,17,909095,-7 NTCO,4,98196,-1 LSXMA,42,1294451,-4 CABO,23,686716,-1 Average,25.1,687326,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $687 million. That figure was $160 million in OTEX's case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Open Text Corporation (NASDAQ:OTEX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OTEX is 51.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on OTEX, though not to the same extent, as the stock returned 9.3% since the end of Q3 (through December 14th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.