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Was The Smart Money Right About SS&C Technologies Holdings (SSNC)?

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) based on those filings.

SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) has seen a decrease in hedge fund sentiment recently. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) was in 49 hedge funds' portfolios at the end of December. The all time high for this statistic is 65. There were 54 hedge funds in our database with SSNC positions at the end of the third quarter. Our calculations also showed that SSNC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Blair Levinsky of Waratah Capital Advisors
Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

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 we're going to take a look at the recent hedge fund action encompassing SS&C Technologies Holdings, Inc. (NASDAQ:SSNC).

Do Hedge Funds Think SSNC Is A Good Stock To Buy Now?

At Q4's end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SSNC over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). Select Equity Group has a $820.9 million position in the stock, comprising 3.4% of its 13F portfolio. Sitting at the No. 2 spot is Panayotis Takis Sparaggis of Alkeon Capital Management, with a $349.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain William von Mueffling's Cantillon Capital Management, Seth Klarman's Baupost Group and John Smith Clark's Southpoint Capital Advisors. In terms of the portfolio weights assigned to each position Blacksheep Fund Management allocated the biggest weight to SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), around 17.5% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, earmarking 10.38 percent of its 13F equity portfolio to SSNC.

Seeing as SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) has faced a decline in interest from the smart money, we can see that there was a specific group of hedgies that elected to cut their entire stakes last quarter. It's worth mentioning that Alexander Captain's Cat Rock Capital said goodbye to the largest investment of the 750 funds followed by Insider Monkey, comprising about $72.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $18.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) but similarly valued. We will take a look at Restaurant Brands International Inc (NYSE:QSR), Smith & Nephew plc (NYSE:SNN), Amcor plc (NYSE:AMCR), Ventas, Inc. (NYSE:VTR), Xylem Inc (NYSE:XYL), DraftKings Inc. (NASDAQ:DKNG), and Dover Corporation (NYSE:DOV). All of these stocks' market caps resemble SSNC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QSR,39,2406995,6 SNN,12,78652,2 AMCR,19,247795,1 VTR,18,137388,1 XYL,21,725127,0 DKNG,48,399067,5 DOV,32,738937,-8 Average,27,676280,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $676 million. That figure was $2624 million in SSNC's case. DraftKings Inc. (NASDAQ:DKNG) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is more popular among hedge funds. Our overall hedge fund sentiment score for SSNC is 72.6. 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 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 still beat the market by 1.6 percentage points. Unfortunately SSNC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SSNC were disappointed as the stock returned 2.3% since the end of the fourth quarter (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 since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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