AdaptHealth Corp. (AHCO): Hedge Funds Are Snapping Up

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about AdaptHealth Corp. (NASDAQ:AHCO).

AdaptHealth Corp. (NASDAQ:AHCO) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. AHCO shareholders have witnessed an increase in hedge fund interest lately. There were 20 hedge funds in our database with AHCO positions at the end of the second quarter. Our calculations also showed that AHCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a peek at the key hedge fund action regarding AdaptHealth Corp. (NASDAQ:AHCO).

Do Hedge Funds Think AHCO Is A Good Stock To Buy Now?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in AHCO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, James E. Flynn’s Deerfield Management has the biggest position in AdaptHealth Corp. (NASDAQ:AHCO), worth close to $188.7 million, corresponding to 3.7% of its total 13F portfolio. The second largest stake is held by Andreas Halvorsen of Viking Global, with a $94.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain David Rosen’s Rubric Capital Management, Lee Ainslie’s Maverick Capital and Steven Boyd’s Armistice Capital. In terms of the portfolio weights assigned to each position Kent Lake Capital allocated the biggest weight to AdaptHealth Corp. (NASDAQ:AHCO), around 4.16% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, dishing out 3.68 percent of its 13F equity portfolio to AHCO.

As one would reasonably expect, key money managers were breaking ground themselves. Rubric Capital Management, managed by David Rosen, created the biggest position in AdaptHealth Corp. (NASDAQ:AHCO). Rubric Capital Management had $53.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $23.4 million position during the quarter. The following funds were also among the new AHCO investors: Vishal Saluja and Pham Quang’s Endurant Capital Management, Steve Cohen’s Point72 Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AdaptHealth Corp. (NASDAQ:AHCO) but similarly valued. These stocks are Liberty Latin America Ltd. (NASDAQ:LILA), SPX FLOW, Inc. (NYSE:FLOW), California Water Service Group (NYSE:CWT), Texas Capital Bancshares Inc (NASDAQ:TCBI), Intra-Cellular Therapies Inc (NASDAQ:ITCI), Corporate Office Properties Trust (NYSE:OFC), and Nelnet, Inc. (NYSE:NNI). All of these stocks’ market caps match AHCO’s market cap.

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As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $472 million in AHCO’s case. Texas Capital Bancshares Inc (NASDAQ:TCBI) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 11 bullish hedge fund positions. AdaptHealth Corp. (NASDAQ:AHCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AHCO is 57.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately AHCO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AHCO were disappointed as the stock returned 5% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.