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Should You Be Tempted To ‘Sell’ Automatic Data Processing (ADP) Stock

Polen Capital Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. During the third quarter of 2020, the Polen Focus Growth Composite Portfolio returned 10.15% gross of fees, while the Russell 1000 Growth Index was up 13.22% and the S&P 500 Index was up 8.93%. You should check out Polen Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Polen Capital highlighted a few stocks and Automatic Data Processing Inc (NASDAQ:ADP) is one of them. Automatic Data Processing Inc (NASDAQ:ADP) is a provider of human resources management software and services. Year-to-date, Automatic Data Processing Inc (NASDAQ:ADP) stock gained 1% and on November 10th it had a closing price of $171.07. Here is what Polen Capital said:

"We have eliminated our position in ADP after a nearly seven-year holding period to fund what we believe is a better investment in UnitedHealth Group. ADP remains a competitively advantaged company with decent growth prospects. Unfortunately, high levels of unemployment in the U.S. and low interest rates have had a doubly negative impact on the business in the short term. At the same time, we believe competitive intensity at the high and low end of the human capital management industry has increased. We believe UnitedHealth is a stronger safety-like candidate for this strategy because it has a similar growth profile to ADP with a much lower valuation, less cyclicality and less competitive intensity in our view."

In Q2 2020, the number of bullish hedge fund positions on Automatic Data Processing Inc (NASDAQ:ADP) stock increased by about 7% from the previous quarter, so a number of other hedge fund managers believe in ADP's growth potential. Our calculations showed that Automatic Data Processing Inc (NASDAQ:ADP) isn't ranked among the 30 most popular stocks among hedge funds.

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