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How Hedge Funds Are Positioned in Long-Term Care Providers

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It is a well-known fact that the rapid advancement in medical sciences is pushing up life expectancy every year. This increase in life expectancy over the years has caused the demand for long-term care facilities to grow at a rapid pace and experts believe that this demand will only continue to rise in the future. Since most of the companies that cater in this space operate a chain of senior living residences and assisted living facilities, their cash flows are generally very stable. This stable cash flow along with the valuable real estate they sit on make long-term care providers highly attractive to both value-focused and fixed-income investors. Taking that into account, in this post, we will take a look at five leading stocks from the long-term care space and discuss what hedge funds covered by us thought about them heading into the second quarter.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

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#5 Press Ganey Holdings Inc (NYSE:PGND)

– Investors with long positions (as of March 31): 10

– Aggregate value of investors’ holdings (as of March 31): $46.5 million

Let’s start with Press Ganey Holdings Inc (NYSE:PGND), which is the only stock in this list that boasts notable gains this year, of 18%. During the first quarter, the number of hedge funds covered by us long Press Ganey Holdings Inc (NYSE:PGND) inched down by one and the aggregate value of their holdings fell by 7%. The patient experience and caregiver measurement provider had its IPO  last year in June and since then its stock has appreciated by nearly 38% from its IPO price of $25. On May 3, the company reported its fiscal 2016 first quarter numbers, declaring EPS of $0.14 on revenue of $86.70 million versus analysts’ projection of EPS of $0.25 on revenue of $83.54 million. On May 22, analysts at KeyBanc reiterated their ‘Buy’ rating on the stock.

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#4 Capital Senior Living Corporation (NYSE:CSU)

– Investors with long positions (as of March 31): 16

– Aggregate value of investors’ holdings (as of March 31): $172.46 million

Capital Senior Living Corporation (NYSE:CSU) saw a major drop in its popularity among hedge funds during the first quarter with the ownership of the company among funds covered by us declining by five and the aggregate value of their holdings in it shrinking by $11.2 million. Funds that upped their stake in the company during that period included George McCabe’s Portolan Capital Management, which increased its holding by 39% to 822,506 shares. On May 22, the company announced that it has reached an agreement with activist investor Lucus Advisors LLC in connection with Capital Senior Living Corporation’s 2016 annual meeting of stockholders. Under the terms of the agreement Capital Senior Living Corporation will be appointing a new independent board member in consultation with Lucas and the activist firm will have an option to propose up to two candidates for this position, who will be given due consideration by the company’s Board. The agreement also includes customary standstill and voting commitments.

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