Do Hedge Funds Really Like Chemed Corporation (CHE)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Chemed Corporation (NYSE:CHE) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Chemed Corporation (NYSE:CHE) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CHE shareholders have witnessed an increase in hedge fund interest in recent months. There were 25 hedge funds in our database with CHE holdings at the end of March. Our calculations also showed that CHE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are a large number of tools market participants can use to size up publicly traded companies. A pair of the best tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outclass the broader indices by a healthy amount (see the details here).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to go over the fresh hedge fund action surrounding Chemed Corporation (NYSE:CHE).

How have hedgies been trading Chemed Corporation (NYSE:CHE)?

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in CHE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Chemed Corporation (NYSE:CHE), with a stake worth $143.9 million reported as of the end of September. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $82 million. GAMCO Investors, AQR Capital Management, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Chemed Corporation (NYSE:CHE), around 1.07% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to CHE.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Chemed Corporation (NYSE:CHE) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Chemed Corporation (NYSE:CHE). Point72 Asset Management had $12.1 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Donald Sussman’s Paloma Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Chemed Corporation (NYSE:CHE) but similarly valued. We will take a look at Albertsons Companies, Inc. (NYSE:ACI), Ascendis Pharma A/S (NASDAQ:ASND), JOYY Inc. (NASDAQ:YY), Nuance Communications Inc. (NASDAQ:NUAN), The Toro Company (NYSE:TTC), Lincoln National Corporation (NYSE:LNC), and Holdings, Inc. (NYSE:BILL). This group of stocks’ market values match CHE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACI 30 2773996 30
ASND 31 2509539 -2
YY 28 585906 13
NUAN 44 1827721 2
TTC 31 702703 7
LNC 34 493924 8
BILL 52 1196788 30
Average 35.7 1441511 12.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1442 million. That figure was $351 million in CHE’s case. Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand JOYY Inc. (NASDAQ:YY) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Chemed Corporation (NYSE:CHE) is even less popular than YY. Our overall hedge fund sentiment score for CHE is 31.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th but managed to beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on CHE, though not to the same extent, as the stock returned 7.5% since the end of June (through 9/25) and outperformed the market as well.

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