Is JKHY Stock A Buy or Sell?

Debasis Saha
·5 min read

We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Jack Henry & Associates, Inc. (NASDAQ:JKHY) based on that data.

Is JKHY stock a buy? Jack Henry & Associates, Inc. (NASDAQ:JKHY) was in 28 hedge funds' portfolios at the end of December. The all time high for this statistic is 31. JKHY shareholders have witnessed a decrease in hedge fund interest of late. There were 30 hedge funds in our database with JKHY positions at the end of the third quarter. Our calculations also showed that JKHY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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. Keeping this in mind let's take a look at the fresh hedge fund action regarding Jack Henry & Associates, Inc. (NASDAQ:JKHY).

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

At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JKHY over the last 22 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is JKHY A Good Stock To Buy?
Is JKHY A Good Stock To Buy?

More specifically, Arrowstreet Capital was the largest shareholder of Jack Henry & Associates, Inc. (NASDAQ:JKHY), with a stake worth $115.6 million reported as of the end of December. Trailing Arrowstreet Capital was Echo Street Capital Management, which amassed a stake valued at $46.4 million. AQR Capital Management, D E Shaw, and Two Sigma Advisors 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 Junto Capital Management allocated the biggest weight to Jack Henry & Associates, Inc. (NASDAQ:JKHY), around 0.77% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, designating 0.76 percent of its 13F equity portfolio to JKHY.

Judging by the fact that Jack Henry & Associates, Inc. (NASDAQ:JKHY) has faced falling interest from hedge fund managers, it's easy to see that there exists a select few money managers who were dropping their entire stakes last quarter. Intriguingly, Steve Cohen's Point72 Asset Management sold off the biggest investment of the 750 funds watched by Insider Monkey, totaling close to $11.5 million in stock, and Peter Seuss's Prana Capital Management was right behind this move, as the fund dropped about $5.9 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Jack Henry & Associates, Inc. (NASDAQ:JKHY). These stocks are GSX Techedu Inc. (NYSE:GSX), NortonLifeLock Inc. (NASDAQ:NLOK), Bio-Techne Corporation (NASDAQ:TECH), Dynatrace, Inc. (NYSE:DT), The Boston Beer Company Inc (NYSE:SAM), Wynn Resorts, Limited (NASDAQ:WYNN), and Graco Inc. (NYSE:GGG). All of these stocks' market caps are closest to JKHY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSX,17,235770,-1 NLOK,29,1000796,-5 TECH,24,301777,-6 DT,53,2023929,7 SAM,35,1143708,-1 WYNN,52,1104483,9 GGG,25,269383,-5 Average,33.6,868549,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $869 million. That figure was $412 million in JKHY's case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 17 bullish hedge fund positions. Jack Henry & Associates, Inc. (NASDAQ:JKHY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JKHY is 45.4. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 0.9 percentage points. Unfortunately JKHY wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); JKHY investors were disappointed as the stock returned -0.2% since the end of December (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 top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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