The hedge funds did quite a bit of buying in the third quarter, but, for the most part, it was mainly selling. That said, on the buy front, there was one name that was a standout, with more than a handful of big-league money managers stepping in after a historic sell-off.
Of course, the hard-hit stock and Q3 hedge fund favorite I speak of is none other than Fiserv (NASDAQ:FISV), a stock that crashed so hard this year that Mad Money host Jim Cramer was reportedly left “astonished.” And while the falling knife has hurt dip-buyers so far, including the many smart hedge funds who initiated or added to positions in the third quarter, I still think the name is worth watching or even buying while the shares have shed close to 75% of their value from peak to trough.
Of course, there are some major challenges that need to be overcome if the stock is to reverse course. But with Fiserv stock trading at levels not seen in more than eight years, I do see the appeal of getting in here, while expectations have been freshly lowered and the valuation implies a deeply undervalued company that might not need to do a great deal to start powering higher again.
Fiserv stock has been crashing hard. How will hedge funds react in Q4?
Undoubtedly, it’s not all too common to witness a blue-chip stock shed nearly two-thirds of its value in less than a year’s time. And while the pain could certainly mount for the $33.2 billion fintech company, which now trades at a mere 9.45 times trailing price-to-earnings (P/E) or 7.2 times forward P/E, I do think that it’s quite tempting to get a shot at a price that’s lower than the price many hedge funds placed last quarter.
While it’s impossible to know what the big money has done with their losing positions in Fiserv shares more recently, I certainly wouldn’t be surprised if some funds were to double down, given that the smart money tends to build up positions over time rather than seeking to make one big bet.
In any case, we’re just going to have to wait for the next round of 13F filings before we get a glimpse of what the smart money has been doing with Fiserv shares, which have gone on to tank another 52% since the start of the fourth quarter. Indeed, it’s certainly tempting to exit and cut one’s losses.
Are Fiserv’s issues fixable?
With full-year earnings guidance lowered considerably and lackluster performance in some of its key markets, it’s tough to go against the grain, especially if much of Fiserv’s woes are attributed to prior cost cuts. Could it be that cost cuts cut a bit too deeply? Possibly.
Either way, I think Fiserv’s issues are more than fixable, especially as the company looks to make more use of AI technologies while looking to shuffle things up at the executive level. It’s been a jarring descent for Fiserv, but I do think there’s real value to be had here for those brave enough to step in after shares have been pretty much sliced into a quarter from peak levels. Now, there’s no sugar-coating the latest quarter, which many view as quite “abysmal.”
However, as Fiserv makes moves to course correct by improving relations with customers (reversing fee hikes) and bringing aboard upper-level talent that can pull off a turnaround, I can’t help but be optimistic when you consider how low the bar and valuation are right here, with shares going for $61 and change per share.
Too many headwinds to name. But how many are already priced in at close to $60?
Undoubtedly, it’s a tough position for whoever’s coming in, but if the firm can make the appropriate changes to delight customers of its Clover POS platform, I do think there’s a path higher. As for Fiserv’s legal woes, I think there’s still an incredible degree of risk there. What’s more, there’s also a considerable amount of debt sitting on the balance sheet (around $30.2 billion), which could limit financial flexibility as management looks to orchestrate some sort of turnaround.
That said, how much of it is already priced into the shares? Time will tell. Either way, if you seek deep value and are content with the big changes coming to the firm, I view it as a must-watch going into the new year. My guess is that the new year will be kinder to Fiserv stock than 2025. Of course, that’s not saying a whole lot, given shares have crashed over 70% year to date.
Top Gaining Stocks
Top Losing Stocks
