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Were Hedge Funds Right About Fidelity National Information Services Inc. (FIS)?

·6 min read

In this article you are going to find out whether hedge funds think Fidelity National Information Services Inc. (NYSE:FIS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Fidelity National Information Services Inc. (NYSE:FIS) was in 72 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 111. FIS shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. There were 74 hedge funds in our database with FIS positions at the end of the first quarter. Our calculations also showed that FIS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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 take a gander at the fresh hedge fund action encompassing Fidelity National Information Services Inc. (NYSE:FIS).

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

At the end of the second quarter, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 111 hedge funds held shares or bullish call options in FIS a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is FIS A Good Stock To Buy?
Is FIS A Good Stock To Buy?

More specifically, Viking Global was the largest shareholder of Fidelity National Information Services Inc. (NYSE:FIS), with a stake worth $1303.4 million reported as of the end of June. Trailing Viking Global was Select Equity Group, which amassed a stake valued at $922.9 million. Steadfast Capital Management, Cantillon Capital Management, and Soroban Capital 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 Park Presidio Capital allocated the biggest weight to Fidelity National Information Services Inc. (NYSE:FIS), around 8.44% of its 13F portfolio. Palestra Capital Management is also relatively very bullish on the stock, earmarking 6.78 percent of its 13F equity portfolio to FIS.

Because Fidelity National Information Services Inc. (NYSE:FIS) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedge funds who sold off their positions entirely in the second quarter. At the top of the heap, Daniel Sundheim's D1 Capital Partners sold off the largest position of the "upper crust" of funds watched by Insider Monkey, comprising about $159.5 million in stock, and James Parsons's Junto Capital Management was right behind this move, as the fund dropped about $93.8 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds in the second quarter.

Let's go over hedge fund activity in other stocks similar to Fidelity National Information Services Inc. (NYSE:FIS). These stocks are Mondelez International Inc (NASDAQ:MDLZ), NIO Inc. (NYSE:NIO), Gilead Sciences, Inc. (NASDAQ:GILD), General Motors Company (NYSE:GM), U.S. Bancorp (NYSE:USB), Automatic Data Processing (NASDAQ:ADP), and Crown Castle International Corp. (NYSE:CCI). All of these stocks' market caps are closest to FIS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDLZ,53,2946868,8 NIO,34,2066911,6 GILD,54,1732734,-11 GM,86,7414862,0 USB,41,8305634,-2 ADP,41,3018791,-1 CCI,42,2093903,-1 Average,50.1,3939958,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.1 hedge funds with bullish positions and the average amount invested in these stocks was $3940 million. That figure was $7370 million in FIS's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 34 bullish hedge fund positions. Fidelity National Information Services Inc. (NYSE:FIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIS is 59. 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 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 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately FIS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FIS were disappointed as the stock returned -21.6% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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