Is Community Healthcare Trust Inc (CHCT) Going to Burn These Hedge Funds?

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: BHR Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case, because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Mendon Capital Advisors).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Community Healthcare Trust Inc (NYSE:CHCT) but similarly valued. We will take a look at JG Wentworth Co (NYSE:JGW), API Technologies Corp (NASDAQ:ATNY), Performant Financial Corp (NASDAQ:PFMT), and DryShips Inc. (NASDAQ:DRYS). This group of stocks’ market caps match CHCT’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $15 million in CHCT’s case. Performant Financial Corp (NASDAQ:PFMT) is the most popular stock in this table. On the other hand JG Wentworth Co (NYSE:JGW) is the least popular one with only 4 bullish hedge fund positions, exactly the number in the case of Community Healthcare Trust Inc (NYSE:CHCT). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.