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Should You Avoid Magellan Health Inc (MGLN)?

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We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Magellan Health Inc (NASDAQ:MGLN), and what that likely means for the prospects of the company and its stock.

Magellan Health Inc (NASDAQ:MGLN) has experienced a decrease in activity from the world’s largest hedge funds of late. MGLN was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with MGLN holdings at the end of the previous quarter. At the end of this article we will also compare MGLN to other stocks including Columbia Banking System Inc (NASDAQ:COLB), Kaiser Aluminum Corp. (NASDAQ:KALU), and Stag Industrial Inc (NYSE:STAG) to get a better sense of its popularity.

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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.

Natallie Adams/Shutterstock.com

Natallie Adams/Shutterstock.com

With all of this in mind, we’re going to check out the key action encompassing Magellan Health Inc (NASDAQ:MGLN).

Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 10% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

HedgeFundSentimentChart

According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the largest position in Magellan Health Inc (NASDAQ:MGLN), worth close to $60.2 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $41.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Samuel Isaly’s OrbiMed Advisors, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital and D. E. Shaw’s D E Shaw.

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