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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Amedisys Inc (NASDAQ:AMED) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Amedisys Inc (NASDAQ:AMED) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Amedisys Inc (NASDAQ:AMED) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 32. There were 20 hedge funds in our database with AMED holdings at the end of March. Our calculations also showed that AMED isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Sander Gerber of Hudson Bay Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing Amedisys Inc (NASDAQ:AMED).
How are hedge funds trading Amedisys Inc (NASDAQ:AMED)?
At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AMED over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Amedisys Inc (NASDAQ:AMED), with a stake worth $55.7 million reported as of the end of September. Trailing D E Shaw was Redmile Group, which amassed a stake valued at $44.9 million. Millennium Management, Polar Capital, and Citadel Investment Group 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 Cloverdale Capital Management allocated the biggest weight to Amedisys Inc (NASDAQ:AMED), around 2.22% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, dishing out 1.64 percent of its 13F equity portfolio to AMED.
As industrywide interest jumped, key money managers were breaking ground themselves. Hudson Bay Capital Management, managed by Sander Gerber, initiated the most outsized position in Amedisys Inc (NASDAQ:AMED). Hudson Bay Capital Management had $26.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $8.6 million position during the quarter. The following funds were also among the new AMED investors: Michael Gelband’s ExodusPoint Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Krishen Sud’s Sivik Global Healthcare.
Let’s check out hedge fund activity in other stocks similar to Amedisys Inc (NASDAQ:AMED). We will take a look at Penumbra Inc (NYSE:PEN), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), United Microelectronics Corp (NYSE:UMC), Cree, Inc. (NASDAQ:CREE), Continental Resources, Inc. (NYSE:CLR), Pan American Silver Corp. (NASDAQ:PAAS), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market caps resemble AMED’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PEN,20,263196,0 OLLI,24,179330,5 UMC,11,110335,-4 CREE,17,597780,1 CLR,23,153030,-3 PAAS,28,590941,-2 WSM,27,457653,1 Average,21.4,336038,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $336 million. That figure was $375 million in AMED’s case. Pan American Silver Corp. (NASDAQ:PAAS) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Amedisys Inc (NASDAQ:AMED) is more popular among hedge funds. Our overall hedge fund sentiment score for AMED is 88.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on AMED as the stock returned 19.4% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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