Should You Buy Molina Healthcare, Inc. (MOH)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Molina Healthcare, Inc. (NYSE:MOH).

Molina Healthcare, Inc. (NYSE:MOH) has experienced an increase in hedge fund sentiment of late. At the end of this article we will also compare MOH to other stocks including PNM Resources, Inc. (NYSE:PNM), Physicians Realty Trust (NYSE:DOC), and Aspen Insurance Holdings Limited (NYSE:AHL) to get a better sense of its popularity.

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.

Now, we’re going to take a peek at the recent action regarding Molina Healthcare, Inc. (NYSE:MOH).

Hedge fund activity in Molina Healthcare, Inc. (NYSE:MOH)

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a modest increase of 3% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the number one position in Molina Healthcare, Inc. (NYSE:MOH), worth close to $153.7 million and comprising 1.7% of its total 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, which holds a $64.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Dmitry Balyasny’s Balyasny Asset Management.

As one would reasonably expect, key hedge funds were breaking ground themselves. Farallon Capital, managed by Thomas Steyer, initiated the most outsized position in Molina Healthcare, Inc. (NYSE:MOH). The fund had $5 million invested in the company at the end of the quarter. Krishen Sud’s Sivik Global Healthcare also initiated a $4.7 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Efrem Kamen’s Pura Vida Investments, and Neil Chriss’s Hutchin Hill Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Molina Healthcare, Inc. (NYSE:MOH) but similarly valued. We will take a look at PNM Resources, Inc. (NYSE:PNM), Physicians Realty Trust (NYSE:DOC), Aspen Insurance Holdings Limited (NYSE:AHL), and Dycom Industries, Inc. (NYSE:DY). This group of stocks’ market caps are similar to MOH’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $537 million in MOH’s case. Dycom Industries, Inc. (NYSE:DY) is the most popular stock in this table. On the other hand PNM Resources, Inc. (NYSE:PNM) is the least popular one with only 13 bullish hedge fund positions. Molina Healthcare, Inc. (NYSE:MOH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DY might be a better candidate to consider a long position.

Disclosure: none.