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Were Hedge Funds Right About ANSYS, Inc. (ANSS)?

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  • ANSS

Is ANSYS, Inc. (NASDAQ:ANSS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is ANSYS, Inc. (NASDAQ:ANSS) the right pick for your portfolio? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions advanced by 13 in recent months. ANSYS, Inc. (NASDAQ:ANSS) was in 46 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ANSS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 33 hedge funds in our database with ANSS holdings at the end of March.

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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Charles Akre Akre Capital Management
Charles Akre Akre Capital Management

Charles Akre of Akre Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV 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. Now let's analyze the new hedge fund action regarding ANSYS, Inc. (NASDAQ:ANSS).

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

At second quarter's end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 39% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ANSS over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Impax Asset Management held the most valuable stake in ANSYS, Inc. (NASDAQ:ANSS), which was worth $256.3 million at the end of the second quarter. On the second spot was Akre Capital Management which amassed $211.6 million worth of shares. Fundsmith LLP, Alkeon Capital Management, and Intermede Investment Partners 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 Crestwood Capital Management allocated the biggest weight to ANSYS, Inc. (NASDAQ:ANSS), around 6.72% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, dishing out 4.59 percent of its 13F equity portfolio to ANSS.

As one would reasonably expect, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in ANSYS, Inc. (NASDAQ:ANSS). Balyasny Asset Management had $18 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $13.8 million position during the quarter. The following funds were also among the new ANSS investors: Ray Dalio's Bridgewater Associates, Michael Gelband's ExodusPoint Capital, and Donald Sussman's Paloma Partners.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ANSYS, Inc. (NASDAQ:ANSS) but similarly valued. We will take a look at Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), SVB Financial Group (NASDAQ:SIVB), Public Service Enterprise Group Incorporated (NYSE:PEG), Sun Life Financial Inc. (NYSE:SLF), Ecopetrol S.A. (NYSE:EC), Nokia Corporation (NYSE:NOK), and Nasdaq, Inc. (NASDAQ:NDAQ). This group of stocks' market values are similar to ANSS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMX,13,904303,-2 SIVB,49,1038598,0 PEG,26,393079,2 SLF,11,94573,-6 EC,6,95004,-2 NOK,26,494361,5 NDAQ,23,191757,1 Average,22,458811,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $459 million. That figure was $1459 million in ANSS's case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 6 bullish hedge fund positions. ANSYS, Inc. (NASDAQ:ANSS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ANSS is 86.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on ANSS as the stock returned 17.2% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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