Here is What Hedge Funds Think About athenahealth, Inc (ATHN)

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards athenahealth, Inc (NASDAQ:ATHN) during the quarter below.

athenahealth, Inc (NASDAQ:ATHN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of September. 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 Turquoise Hill Resources Ltd (NYSE:TRQ), Huntington Ingalls Industries Inc (NYSE:HII), and The Ultimate Software Group, Inc. (NASDAQ:ULTI) to gather more data points.

In the financial world, there are many methods shareholders have at their disposal to analyze their stock investments. Two of the less utilized methods are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy amount (see the details here).

Now, let’s check out the new action encompassing athenahealth, Inc (NASDAQ:ATHN).

How are hedge funds trading athenahealth, Inc (NASDAQ:ATHN)?

Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Christopher Lord’s Criterion Capital has the most valuable position in athenahealth, Inc (NASDAQ:ATHN), worth close to $173.8 million, corresponding to 5.9% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $58 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Lee Munder’s Lee Munder Capital Group and Robert Joseph Caruso’s Select Equity Group.

Due to the fact that athenahealth, Inc (NASDAQ:ATHN) has witnessed a declination in interest from hedge fund managers, it’s easy to see that there was a specific group of funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Jacob Gottlieb’s Visium Asset Management dropped the largest position of the “upper crust” of funds followed by Insider Monkey, valued at about $19.8 million in stock, and Richard Schimel’s Sterling Ridge Capital Management was right behind this move, as the fund sold off about $3.9 million worth of shares. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as athenahealth, Inc (NASDAQ:ATHN) but similarly valued. We will take a look at Turquoise Hill Resources Ltd (NYSE:TRQ), Huntington Ingalls Industries Inc (NYSE:HII), The Ultimate Software Group, Inc. (NASDAQ:ULTI), and Lennox International Inc. (NYSE:LII). This group of stocks’ market valuations are similar to ATHN’s market valuation.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $424 million in ATHN’s case. Huntington Ingalls Industries Inc (NYSE:HII) is the most popular stock in this table. On the other hand The Ultimate Software Group, Inc. (NASDAQ:ULTI) is the least popular one with only 16 bullish hedge fund positions. athenahealth, Inc (NASDAQ:ATHN) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HII might be a better candidate to consider a long position.