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Were Hedge Funds Right About Autodesk, Inc. (ADSK)?

Debasis Saha
·6 min read

Is Autodesk, Inc. (NASDAQ:ADSK) 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.

Autodesk, Inc. (NASDAQ:ADSK) has experienced an increase in hedge fund interest recently. Autodesk, Inc. (NASDAQ:ADSK) was in 67 hedge funds' portfolios at the end of June. The all time high for this statistics is 66. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 65 hedge funds in our database with ADSK positions at the end of the first quarter. Our calculations also showed that ADSK isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a peek at the recent hedge fund action surrounding Autodesk, Inc. (NASDAQ:ADSK).

How are hedge funds trading Autodesk, Inc. (NASDAQ:ADSK)?

At Q2's end, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 56 hedge funds held shares or bullish call options in ADSK a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is ADSK A Good Stock To Buy?
Is ADSK A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Lone Pine Capital has the number one position in Autodesk, Inc. (NASDAQ:ADSK), worth close to $500.4 million, accounting for 2.5% of its total 13F portfolio. On Lone Pine Capital's heels is D. E. Shaw of D E Shaw, with a $324.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain William von Mueffling's Cantillon Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and Panayotis Takis Sparaggis's Alkeon Capital Management. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Autodesk, Inc. (NASDAQ:ADSK), around 17.18% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, setting aside 8.02 percent of its 13F equity portfolio to ADSK.

As one would reasonably expect, specific money managers have been driving this bullishness. Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, assembled the most outsized position in Autodesk, Inc. (NASDAQ:ADSK). Praesidium Investment Management Company had $58.4 million invested in the company at the end of the quarter. John Brennan's Sirios Capital Management also made a $15.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Mikal Patel's Oribel Capital Management, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Zach Schreiber's Point State Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Autodesk, Inc. (NASDAQ:ADSK) but similarly valued. We will take a look at Brookfield Asset Management Inc. (NYSE:BAM), Moody's Corporation (NYSE:MCO), Humana Inc (NYSE:HUM), Northrop Grumman Corporation (NYSE:NOC), Global Payments Inc (NYSE:GPN), Sea Limited (NYSE:SE), and Truist Financial Corporation (NYSE:TFC). This group of stocks' market valuations are closest to ADSK's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAM,33,1001293,-4 MCO,61,10770558,11 HUM,73,4697967,3 NOC,47,990004,2 GPN,66,3311740,-1 SE,82,6358325,6 TFC,33,287639,-1 Average,56.4,3916789,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.4 hedge funds with bullish positions and the average amount invested in these stocks was $3917 million. That figure was $3015 million in ADSK's case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Brookfield Asset Management Inc. (NYSE:BAM) is the least popular one with only 33 bullish hedge fund positions. Autodesk, Inc. (NASDAQ:ADSK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADSK is 71.7. 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 positive signal but 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately ADSK wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ADSK were disappointed as the stock returned 8.7% since the end of June (through 10/16) 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 many of these stocks already outperformed the market so far this year.

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

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