We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Paycom Software Inc (NYSE:PAYC) based on that data.
Is PAYC a good stock to buy now? Paycom Software Inc (NYSE:PAYC) has experienced an increase in activity from the world's largest hedge funds lately. Paycom Software Inc (NYSE:PAYC) was in 38 hedge funds' portfolios at the end of September. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PAYC 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.
To most traders, hedge funds are perceived as underperforming, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers look at the top tier of this club, approximately 850 funds. These investment experts have their hands on most of the smart money's total asset base, and by keeping an eye on their finest investments, Insider Monkey has unsheathed numerous investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Ken Fisher of Fisher Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we're going to take a peek at the latest hedge fund action encompassing Paycom Software Inc (NYSE:PAYC).
Do Hedge Funds Think PAYC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in PAYC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Alyeska Investment Group was the largest shareholder of Paycom Software Inc (NYSE:PAYC), with a stake worth $91.5 million reported as of the end of September. Trailing Alyeska Investment Group was SQN Investors, which amassed a stake valued at $82.2 million. Citadel Investment Group, Fisher Asset Management, and Cat Rock Capital 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 Cat Rock Capital allocated the biggest weight to Paycom Software Inc (NYSE:PAYC), around 6.62% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, designating 5.74 percent of its 13F equity portfolio to PAYC.
As one would reasonably expect, key money managers have jumped into Paycom Software Inc (NYSE:PAYC) headfirst. Cat Rock Capital, managed by Alexander Captain, created the biggest position in Paycom Software Inc (NYSE:PAYC). Cat Rock Capital had $63.8 million invested in the company at the end of the quarter. Jack Woodruff's Candlestick Capital Management also made a $40.5 million investment in the stock during the quarter. The following funds were also among the new PAYC investors: Dmitry Balyasny's Balyasny Asset Management, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Tor Minesuk's Mondrian Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Paycom Software Inc (NYSE:PAYC) but similarly valued. We will take a look at Teladoc Health, Inc (NYSE:TDOC), Garmin Ltd. (NASDAQ:GRMN), Telefonica S.A. (NYSE:TEF), EPAM Systems Inc (NYSE:EPAM), Maxim Integrated Products Inc. (NASDAQ:MXIM), Akamai Technologies, Inc. (NASDAQ:AKAM), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks' market caps resemble PAYC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDOC,47,997283,3 GRMN,32,515382,9 TEF,5,6896,-1 EPAM,33,574847,5 MXIM,52,1964354,19 AKAM,40,441271,0 COO,30,1218371,-4 Average,34.1,816915,4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $817 million. That figure was $655 million in PAYC's case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. Paycom Software Inc (NYSE:PAYC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PAYC is 72.1. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on PAYC as the stock returned 41.3% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Paycom Software Inc. (NYSE:PAYC)
Disclosure: None. This article was originally published at Insider Monkey.