Should You Follow Hedge Funds Into Healthways, Inc. (HWAY)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Healthways, Inc. (NASDAQ:HWAY).

Healthways, Inc. (NASDAQ:HWAY) was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. HWAY investors should pay attention to an increase in hedge fund interest of late. There were 18 hedge funds in our database with HWAY positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Modine Manufacturing Co. (NYSE:MOD), Stoneridge, Inc. (NYSE:SRI), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) to gather more data points.

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.

What have hedge funds been doing with Healthways, Inc. (NASDAQ:HWAY)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 6% boost from one quarter earlier. Hedgie ownership of the stock remains at depressed levels compared to a year earlier, despite the slight uptick. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Conan Laughlin’s North Tide Capital has the biggest position in Healthways, Inc. (NASDAQ:HWAY), worth close to $119.1 million, accounting for 13% of its total 13F portfolio. On North Tide Capital’s heels is Renaissance Technologies, managed by Jim Simons, which holds a $43 million position. Remaining professional money managers that hold long positions encompass D E Shaw, Chuck Royce’s Royce & Associates, and Peter Schliemann’s Rutabaga Capital Management.

As industry-wide interest jumped, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Healthways, Inc. (NASDAQ:HWAY). Point72 Asset Management had $4.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $4 million investment in the stock during the quarter. The other funds with new positions in the stock are Joseph Edelman’s Perceptive Advisors, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Healthways, Inc. (NASDAQ:HWAY) but similarly valued. We will take a look at Modine Manufacturing Co. (NYSE:MOD), Stoneridge, Inc. (NYSE:SRI), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and PJT Partners Inc (NYSE:PJT). This group of stocks’ market values are similar to HWAY’s market value.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $279 million in HWAY’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the least popular one with only 9 bullish hedge fund positions. Healthways, Inc. (NASDAQ:HWAY) 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 SRI might be a better candidate to consider a long position.

Disclosure: None