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At Insider Monkey, we pore over the filings of nearly 887 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 December 31st. In this article, we will use that wealth of knowledge to determine whether or not Cognizant Technology Solutions Corp (NASDAQ:CTSH) makes for a good investment right now.
Is Cognizant Technology Solutions Corp (NASDAQ:CTSH) worth your attention right now? The best stock pickers were turning bullish. The number of bullish hedge fund positions increased by 1 recently. Cognizant Technology Solutions Corp (NASDAQ:CTSH) was in 46 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 55. Our calculations also showed that CTSH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 45 hedge funds in our database with CTSH holdings at the end of September.
In the 21st century investor’s toolkit there are a lot of metrics shareholders employ to size up stocks. A duo of the most under-the-radar metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a peek at the recent hedge fund action encompassing Cognizant Technology Solutions Corp (NASDAQ:CTSH).
Do Hedge Funds Think CTSH Is A Good Stock To Buy Now?
At the end of December, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. By comparison, 43 hedge funds held shares or bullish call options in CTSH a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cognizant Technology Solutions Corp (NASDAQ:CTSH) was held by Generation Investment Management, which reported holding $1139.1 million worth of stock at the end of December. It was followed by Pzena Investment Management with a $703.8 million position. Other investors bullish on the company included Diamond Hill Capital, Yacktman Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Broad Peak Investment Holdings allocated the biggest weight to Cognizant Technology Solutions Corp (NASDAQ:CTSH), around 7.02% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, earmarking 5.08 percent of its 13F equity portfolio to CTSH.
Consequently, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Cognizant Technology Solutions Corp (NASDAQ:CTSH). Point72 Asset Management had $16.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $5.8 million investment in the stock during the quarter. The following funds were also among the new CTSH investors: Frank Fu's CaaS Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Qing Li's Sciencast Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cognizant Technology Solutions Corp (NASDAQ:CTSH) but similarly valued. We will take a look at Ross Stores, Inc. (NASDAQ:ROST), Twitter Inc (NYSE:TWTR), TAL Education Group (NYSE:TAL), Marriott International Inc (NASDAQ:MAR), Enterprise Products Partners L.P. (NYSE:EPD), ConocoPhillips (NYSE:COP), and General Dynamics Corporation (NYSE:GD). All of these stocks' market caps are closest to CTSH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROST,57,1308907,11 TWTR,78,2777387,3 TAL,29,1970456,-12 MAR,58,3421401,2 EPD,30,316886,0 COP,49,687393,4 GD,40,4955250,3 Average,48.7,2205383,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.7 hedge funds with bullish positions and the average amount invested in these stocks was $2205 million. That figure was $3517 million in CTSH's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand TAL Education Group (NYSE:TAL) is the least popular one with only 29 bullish hedge fund positions. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CTSH is 48.4. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately CTSH wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CTSH investors were disappointed as the stock returned -1.6% since the end of December (through 4/30) 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.