Vanguard Health Systems, Inc. (NYSE:VHS) was in 12 hedge funds' portfolio at the end of March. VHS has seen an increase in support from the world's most elite money managers lately. There were 11 hedge funds in our database with VHS positions at the end of the previous quarter.
According to most stock holders, hedge funds are seen as worthless, outdated financial vehicles of the past. While there are over 8000 funds trading at present, we choose to focus on the upper echelon of this club, about 450 funds. Most estimates calculate that this group oversees the majority of the hedge fund industry's total capital, and by paying attention to their top equity investments, we have figured out a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as integral, optimistic insider trading sentiment is a second way to break down the marketplace. Obviously, there are lots of motivations for a bullish insider to get rid of shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this tactic if investors understand what to do (learn more here).
With these "truths" under our belt, we're going to take a peek at the recent action encompassing Vanguard Health Systems, Inc. (NYSE:VHS).
In preparation for this quarter, a total of 12 of the hedge funds we track were long in this stock, a change of 9% from the first quarter. 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 significantly.
According to our comprehensive database, Stephen DuBois's Camber Capital Management had the biggest position in Vanguard Health Systems, Inc. (NYSE:VHS), worth close to $46.8 million, accounting for 3.8% of its total 13F portfolio. Coming in second is Redmile Group, managed by Jeremy Green, which held a $10.9 million position; 2% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Mark Kingdon's Kingdon Capital, Barton Biggs's Traxis Partners and James E. Flynn's Deerfield Management.
As industrywide interest jumped, specific money managers have jumped into Vanguard Health Systems, Inc. (NYSE:VHS) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Vanguard Health Systems, Inc. (NYSE:VHS). Arrowstreet Capital had 0.3 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a brand new VHS position is Ken Griffin's Citadel Investment Group.
Insider purchases made by high-level executives is at its handiest when the company we're looking at has experienced transactions within the past half-year. Over the latest half-year time frame, Vanguard Health Systems, Inc. (NYSE:VHS) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let's check out hedge fund and insider activity in other stocks similar to Vanguard Health Systems, Inc. (NYSE:VHS). These stocks are Community Health Systems (NYSE:CYH), Health Management Associates Inc (NYSE:HMA), LifePoint Hospitals, Inc. (NASDAQ:LPNT), Select Medical Holdings Corporation (NYSE:SEM), and Amsurg Corp (NASDAQ:AMSG). This group of stocks are the members of the hospitals industry and their market caps are similar to VHS's market cap.