We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. What do these smart investors think about Autodesk, Inc. (NASDAQ:ADSK)?
Autodesk, Inc. (NASDAQ:ADSK) was in 64 hedge funds' portfolios at the end of the fourth quarter of 2019. ADSK shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 48 hedge funds in our database with ADSK positions at the end of the previous quarter. Our calculations also showed that ADSK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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. 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 41 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.
[caption id="attachment_364853" align="aligncenter" width="400"] William Von Mueffling of Cantillon Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager's coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a gander at the fresh hedge fund action surrounding Autodesk, Inc. (NASDAQ:ADSK).
What does smart money think about Autodesk, Inc. (NASDAQ:ADSK)?
At Q4's end, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADSK over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Lone Pine Capital held the most valuable stake in Autodesk, Inc. (NASDAQ:ADSK), which was worth $603.3 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $302.2 million worth of shares. Darsana Capital Partners, Cantillon Capital Management, and SRS Investment Management 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 HMI Capital allocated the biggest weight to Autodesk, Inc. (NASDAQ:ADSK), around 12.52% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, setting aside 10.55 percent of its 13F equity portfolio to ADSK.
As industrywide interest jumped, key money managers have been driving this bullishness. Cantillon Capital Management, managed by William von Mueffling, established the most outsized position in Autodesk, Inc. (NASDAQ:ADSK). Cantillon Capital Management had $236.4 million invested in the company at the end of the quarter. Christian Leone's Luxor Capital Group also initiated a $88.2 million position during the quarter. The following funds were also among the new ADSK investors: Christopher R. Hansen's Valiant Capital, Sharlyn C. Heslam's Stockbridge Partners, and Greg Poole's Echo Street Capital Management.
Let's check out hedge fund activity in other stocks similar to Autodesk, Inc. (NASDAQ:ADSK). These stocks are V.F. Corporation (NYSE:VFC), Dollar General Corp. (NYSE:DG), Manulife Financial Corporation (NYSE:MFC), and FedEx Corporation (NYSE:FDX). This group of stocks' market values resemble ADSK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VFC,29,770788,-7 DG,50,2075641,1 MFC,19,284486,0 FDX,45,1481070,0 Average,35.75,1152996,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1153 million. That figure was $3358 million in ADSK's case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Manulife Financial Corporation (NYSE:MFC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Autodesk, Inc. (NASDAQ:ADSK) is more popular among hedge funds. 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 lost 1.0% in 2020 through April 20th but still managed to beat the market by 11 percentage points. Hedge funds were also right about betting on ADSK, though not to the same extent, as the stock returned -3% in 2020 (through April 20th) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.