Hedge Funds Are Crazy About Community Health Systems (CYH)

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Community Health Systems (NYSE:CYH).

Community Health Systems (NYSE:CYH) has seen an increase in activity from the world’s largest hedge funds in recent months. CYH was in 37 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with CYH holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as La Quinta Holdings Inc (NYSE:LQ), 2U Inc (NASDAQ:TWOU), and Fidelity & Guaranty Life (NYSE:FGL) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to analyze the new action encompassing Community Health Systems (NYSE:CYH).

What have hedge funds been doing with Community Health Systems (NYSE:CYH)?

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 12% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, North Tide Capital, managed by Conan Laughlin, holds the biggest position in Community Health Systems (NYSE:CYH). North Tide Capital has a $63.5 million stake in the stock, comprising 6.9% of its 13F portfolio. The second most bullish fund manager is Camber Capital Management, led by Stephen DuBois, holding a $57.7 million position; 2.5% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include Gabe Hoffman’s Accipiter Capital Management, Boaz Weinstein’s Saba Capital and Steve Cohen’s Point72 Asset Management.

Now, key money managers were breaking ground themselves. Point72 Asset Management, run by Steve Cohen, established the most outsized position in Community Health Systems (NYSE:CYH). The fund had $15 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also initiated a $13.8 million position during the quarter. The other funds with brand new CYH positions are Zach Schreiber’s Point State Capital, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors, and Michael A. Price and Amos Meron’s Empyrean Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Community Health Systems (NYSE:CYH) but similarly valued. These stocks are La Quinta Holdings Inc (NYSE:LQ), 2U Inc (NASDAQ:TWOU), Fidelity & Guaranty Life (NYSE:FGL), and Amkor Technology, Inc. (NASDAQ:AMKR). This group of stocks’ market values are similar to CYH’s market value.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $276 million in CYH’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand Fidelity & Guaranty Life (NYSE:FGL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Community Health Systems (NYSE:CYH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.