Do Hedge Funds Love American Software, Inc. (AMSWA)?
Abigail Fisher
6 min read
With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was American Software, Inc. (NASDAQ:AMSWA).
Is American Software, Inc. (NASDAQ:AMSWA) a healthy stock for your portfolio? Investors who are in the know were becoming less hopeful. The number of bullish hedge fund bets were trimmed by 1 lately. American Software, Inc. (NASDAQ:AMSWA) was in 11 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that AMSWA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 12 hedge funds in our database with AMSWA positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
AQR CAPITAL MANAGEMENT
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let's check out the latest hedge fund action regarding American Software, Inc. (NASDAQ:AMSWA).
Do Hedge Funds Think AMSWA Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in AMSWA a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of American Software, Inc. (NASDAQ:AMSWA), with a stake worth $29.8 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $4.5 million. Royce & Associates, Two Sigma Advisors, and AQR Capital 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 Renaissance Technologies allocated the biggest weight to American Software, Inc. (NASDAQ:AMSWA), around 0.03% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to AMSWA.
Judging by the fact that American Software, Inc. (NASDAQ:AMSWA) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of funds who sold off their entire stakes heading into Q4. Interestingly, Roger Ibbotson's Zebra Capital Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $0.3 million in stock. Mark Broach's fund, Manatuck Hill Partners, also cut its stock, about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as American Software, Inc. (NASDAQ:AMSWA) but similarly valued. We will take a look at Inventiva S.A. (NASDAQ:IVA), Ennis, Inc. (NYSE:EBF), Bank First Corporation (NASDAQ:BFC), Digi International Inc. (NASDAQ:DGII), Boston Private Financial Hldg Inc (NASDAQ:BPFH), CrossFirst Bankshares, Inc. (NASDAQ:CFB), and Boingo Wireless Inc (NASDAQ:WIFI). This group of stocks' market values are closest to AMSWA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IVA,8,26719,8 EBF,8,62311,-2 BFC,1,18,-1 DGII,11,40764,0 BPFH,22,29544,2 CFB,3,8221,-1 WIFI,15,190271,0 Average,9.7,51121,0.9 [/table]
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $41 million in AMSWA's case. Boston Private Financial Hldg Inc (NASDAQ:BPFH) is the most popular stock in this table. On the other hand Bank First Corporation (NASDAQ:BFC) is the least popular one with only 1 bullish hedge fund positions. American Software, Inc. (NASDAQ:AMSWA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMSWA is 55.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on AMSWA as the stock returned 19.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
