Do Hedge Funds Love Select Medical Holdings Corporation (SEM)?

In this article you are going to find out whether hedge funds think Select Medical Holdings Corporation (NYSE:SEM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Select Medical Holdings Corporation (NYSE:SEM) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Select Medical Holdings Corporation (NYSE:SEM) was in 22 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that SEM 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. Now let’s take a look at the fresh hedge fund action surrounding Select Medical Holdings Corporation (NYSE:SEM).

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

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SEM over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Select Medical Holdings Corporation (NYSE:SEM). Arrowstreet Capital has a $64.5 million position in the stock, comprising 0.1% of its 13F portfolio. On Arrowstreet Capital’s heels is OrbiMed Advisors, holding a $46 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism comprise Ken Heebner’s Capital Growth Management, Steve Cohen’s Point72 Asset Management and Krishen Sud’s Sivik Global Healthcare. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Select Medical Holdings Corporation (NYSE:SEM), around 3.37% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, earmarking 3.17 percent of its 13F equity portfolio to SEM.

Since Select Medical Holdings Corporation (NYSE:SEM) has witnessed a decline in interest from the smart money, it’s easy to see that there were a few fund managers that decided to sell off their entire stakes in the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $8.4 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $4.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Select Medical Holdings Corporation (NYSE:SEM). We will take a look at Amedisys Inc (NASDAQ:AMED), JetBlue Airways Corporation (NASDAQ:JBLU), Herc Holdings Inc. (NYSE:HRI), The Howard Hughes Corporation (NYSE:HHC), Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS), Driven Brands Holdings Inc. (NASDAQ:DRVN), and Vimeo Inc. (NASDAQ:VMEO). This group of stocks’ market values resemble SEM’s market value.

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As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $229 million in SEM’s case. Vimeo Inc. (NASDAQ:VMEO) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS) is the least popular one with only 6 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SEM is 55.1. 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 negative signal and 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 surpassed the market again by 3.6 percentage points. Unfortunately SEM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SEM investors were disappointed as the stock returned -18.4% 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 most of these stocks already outperformed the market in 2021.

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