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Do Hedge Funds and Insiders Love HEALTHSOUTH Corp. (HLS)?

To the average investor, there are a multitude of indicators market participants can use to analyze their holdings. A duo of the most under-the-radar are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a significant margin (see just how much).

Just as key, optimistic insider trading activity is another way to look at the investments you’re interested in. Obviously, there are a number of stimuli for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the market-beating potential of this tactic if “monkeys” know where to look (learn more here).

HealthSouth Corp (NYSE:HLS)

Now that that’s out of the way, we’re going to analyze the recent info surrounding HEALTHSOUTH Corp. (NYSE:HLS).

What does the smart money think about HEALTHSOUTH Corp. (NYSE:HLS)?

At the end of the second quarter, a total of 25 of the hedge funds we track were long in this stock, a change of 14% from the first quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully.

According to our 13F database, John Osterweis’s Osterweis Capital Management had the biggest position in HEALTHSOUTH Corp. (NYSE:HLS), worth close to $88.3 million, accounting for 3.3% of its total 13F portfolio. Sitting at the No. 2 spot is Mariko Gordon of Daruma Asset Management, with a $73.1 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Jeffrey Edwards’s East Peak Partners, Chuck Royce’s Royce & Associates and John Overdeck and David Siegel’s Two Sigma Advisors.

Now, particular hedge funds were breaking ground themselves. Osterweis Capital Management, managed by John Osterweis, created the biggest position in HEALTHSOUTH Corp. (NYSE:HLS). Osterweis Capital Management had 88.3 million invested in the company at the end of the quarter. Mariko Gordon’s Daruma Asset Management also initiated a $73.1 million position during the quarter. The following funds were also among the new HLS investors: Jeffrey Edwards’s East Peak Partners, Chuck Royce’s Royce & Associates, and John Overdeck and David Siegel’s Two Sigma Advisors.

How are insiders trading HEALTHSOUTH Corp. (NYSE:HLS)?

Insider buying made by high-level executives is at its handiest when the company in question has experienced transactions within the past 180 days. Over the last half-year time period, HEALTHSOUTH Corp. (NYSE:HLS) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to HEALTHSOUTH Corp. (NYSE:HLS). These stocks are Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS), IPC The Hospitalist Company Inc (NASDAQ:IPCM), Hanger Inc (NYSE:HGR), Mednax Inc. (NYSE:MD), and Acadia Healthcare Company Inc (NASDAQ:ACHC). All of these stocks are in the specialized health services industry and their market caps resemble HLS’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) 4 0 0
IPC The Hospitalist Company Inc (NASDAQ:IPCM) 7 0 0
Hanger Inc (NYSE:HGR) 11 0 0
Mednax Inc. (NYSE:MD) 14 0 0
Acadia Healthcare Company Inc (NASDAQ:ACHC) 18 0 0

Using the returns explained by our studies, regular investors should always watch hedge fund and insider trading activity, and HEALTHSOUTH Corp. (NYSE:HLS) is an important part of this process.

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