Do Hedge Funds Love Health Catalyst, Inc (HCAT)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Health Catalyst, Inc (NASDAQ:HCAT).

Is Health Catalyst, Inc (NASDAQ:HCAT) a healthy stock for your portfolio? Investors who are in the know were cutting their exposure. The number of long hedge fund bets shrunk by 1 in recent months. Health Catalyst, Inc (NASDAQ:HCAT) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 21. Our calculations also showed that HCAT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 21 hedge funds in our database with HCAT holdings at the end of December.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Henrik Rhenman of Rhenman & Partners Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the key hedge fund action surrounding Health Catalyst, Inc (NASDAQ:HCAT).

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

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in HCAT a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management has the most valuable position in Health Catalyst, Inc (NASDAQ:HCAT), worth close to $36.7 million, corresponding to 0.8% of its total 13F portfolio. The second most bullish fund manager is Perceptive Advisors, managed by Joseph Edelman, which holds a $23.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, Ian Simm’s Impax Asset Management and OrbiMed Advisors. In terms of the portfolio weights assigned to each position Adams Street Partners allocated the biggest weight to Health Catalyst, Inc (NASDAQ:HCAT), around 1.2% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 0.8 percent of its 13F equity portfolio to HCAT.

Judging by the fact that Health Catalyst, Inc (NASDAQ:HCAT) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of funds that slashed their positions entirely heading into Q2. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $40.5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $14 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q2.

Let’s now take a look at hedge fund activity in other stocks similar to Health Catalyst, Inc (NASDAQ:HCAT). These stocks are Constellium SE (NYSE:CSTM), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), USANA Health Sciences, Inc. (NYSE:USNA), Century Communities, Inc (NYSE:CCS), The RealReal, Inc. (NASDAQ:REAL), Chesapeake Utilities Corporation (NYSE:CPK), and EHang Holdings Limited (NASDAQ:EH). This group of stocks’ market valuations are closest to HCAT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSTM 36 377226 1
EPAY 19 98039 1
USNA 19 250382 -3
CCS 24 123486 6
REAL 24 399233 -8
CPK 6 6692 2
EH 4 7063 2
Average 18.9 180303 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $135 million in HCAT’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand EHang Holdings Limited (NASDAQ:EH) is the least popular one with only 4 bullish hedge fund positions. Health Catalyst, Inc (NASDAQ:HCAT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HCAT is 57.6. 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. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on HCAT, though not to the same extent, as the stock returned 18% since Q1 (through July 16th) and outperformed the market as well.

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