Were Hedge Funds Right About Piling Into Fiserv (FISV)?
In this article we will check out the progression of hedge fund sentiment towards Fiserv, Inc. (NASDAQ:FISV) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Fiserv, Inc. (NASDAQ:FISV) a bargain? Money managers were becoming hopeful. The number of bullish hedge fund bets went up by 4 recently. Fiserv, Inc. (NASDAQ:FISV) was in 94 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 90. This means the bullish number of hedge fund positions in this stock reached another all time high. Our calculations also showed that FISV ranked #28 among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here).
Jeffrey Ubben of ValueAct Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind let's take a glance at the new hedge fund action encompassing Fiserv, Inc. (NASDAQ:FISV).
Do Hedge Funds Think FISV Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 94 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 78 hedge funds with a bullish position in FISV a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Fiserv, Inc. (NASDAQ:FISV) was held by Melvin Capital Management, which reported holding $990.4 million worth of stock at the end of December. It was followed by BlueSpruce Investments with a $613.1 million position. Other investors bullish on the company included Kensico Capital, Maplelane Capital, and Point State Capital. In terms of the portfolio weights assigned to each position Columbus Point allocated the biggest weight to Fiserv, Inc. (NASDAQ:FISV), around 12.2% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 12.08 percent of its 13F equity portfolio to FISV.
Now, key hedge funds have been driving this bullishness. Corvex Capital, managed by Keith Meister, assembled the most valuable position in Fiserv, Inc. (NASDAQ:FISV). Corvex Capital had $59.2 million invested in the company at the end of the quarter. Jeffrey Ubben's ValueAct Capital also initiated a $37.4 million position during the quarter. The following funds were also among the new FISV investors: Simon Sadler's Segantii Capital, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Fiserv, Inc. (NASDAQ:FISV) but similarly valued. These stocks are NIO Inc. (NYSE:NIO), Automatic Data Processing (NASDAQ:ADP), Cigna Corporation (NYSE:CI), Snap Inc. (NYSE:SNAP), Baidu, Inc. (NASDAQ:BIDU), Prologis Inc (NYSE:PLD), and Colgate-Palmolive Company (NYSE:CL). This group of stocks' market valuations are closest to FISV's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NIO,34,2634013,-1 ADP,48,3064769,6 CI,57,2578300,-5 SNAP,63,4610841,12 BIDU,51,4634061,8 PLD,36,655443,3 CL,46,1515874,-1 Average,47.9,2813329,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.9 hedge funds with bullish positions and the average amount invested in these stocks was $2813 million. That figure was $5178 million in FISV's case. Snap Inc. (NYSE:SNAP) 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. Compared to these stocks Fiserv, Inc. (NASDAQ:FISV) is more popular among hedge funds. Our overall hedge fund sentiment score for FISV is 89. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately FISV wasn't nearly as successful as these 30 stocks and hedge funds that were betting on FISV were disappointed as the stock returned 9.9% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 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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