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

Nina Todic

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Autodesk, Inc. (NASDAQ:ADSK) makes for a good investment right now.

Is Autodesk, Inc. (NASDAQ:ADSK) a bargain? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund positions were cut by 1 lately. Our calculations also showed that ADSK isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article). ADSK was in 56 hedge funds' portfolios at the end of the second quarter of 2019. There were 57 hedge funds in our database with ADSK holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lone Pine Capital 2015 Q2 Investor Letter

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the recent hedge fund action encompassing Autodesk, Inc. (NASDAQ:ADSK).

What have hedge funds been doing with Autodesk, Inc. (NASDAQ:ADSK)?

At Q2's end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ADSK over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ADSK Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lone Pine Capital, managed by Stephen Mandel, holds the number one position in Autodesk, Inc. (NASDAQ:ADSK). Lone Pine Capital has a $650 million position in the stock, comprising 4% of its 13F portfolio. On Lone Pine Capital's heels is Egerton Capital Limited, managed by John Armitage, which holds a $441.9 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Anand Desai's Darsana Capital Partners, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and John Overdeck and David Siegel's Two Sigma Advisors.

Because Autodesk, Inc. (NASDAQ:ADSK) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedgies that slashed their full holdings last quarter. It's worth mentioning that John Smith Clark's Southpoint Capital Advisors dropped the largest position of the 750 funds watched by Insider Monkey, comprising about $77.9 million in stock, and Dennis Puri and Oliver Keller's Hunt Lane Capital was right behind this move, as the fund said goodbye to about $31.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Autodesk, Inc. (NASDAQ:ADSK). We will take a look at The Kraft Heinz Company (NASDAQ:KHC), Ecopetrol S.A. (NYSE:EC), Energy Transfer L.P. (NYSE:ET), and National Grid plc (NYSE:NGG). All of these stocks' market caps match ADSK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KHC,34,10579951,5 EC,10,189695,-5 ET,29,763141,1 NGG,8,532366,0 Average,20.25,3016288,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $3016 million. That figure was $3385 million in ADSK's case. The Kraft Heinz Company (NASDAQ:KHC) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Autodesk, Inc. (NASDAQ:ADSK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ADSK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ADSK were disappointed as the stock returned -9.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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