Do Hedge Funds Really Like HCA Healthcare Inc (HCA)?

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is HCA Healthcare Inc (NYSE:HCA) a good investment now? The best stock pickers are betting on the stock. The number of long hedge fund bets moved up by 10 in recent months. Our calculations also showed that HCA isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.


We’re going to review the key hedge fund action regarding HCA Healthcare Inc (NYSE:HCA).

How are hedge funds trading HCA Healthcare Inc (NYSE:HCA)?

Heading into the first quarter of 2019, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HCA over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).


More specifically, Glenview Capital was the largest shareholder of HCA Healthcare Inc (NYSE:HCA), with a stake worth $609.6 million reported as of the end of September. Trailing Glenview Capital was Arrowstreet Capital, which amassed a stake valued at $506.6 million. AQR Capital Management, GLG Partners, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key hedge funds have jumped into HCA Healthcare Inc (NYSE:HCA) headfirst. Tavio Capital, managed by Amy Mulderry, initiated the most outsized position in HCA Healthcare Inc (NYSE:HCA). Tavio Capital had $27.4 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $9.3 million position during the quarter. The following funds were also among the new HCA investors: Matthew Tewksbury’s Stevens Capital Management, Ira Unschuld’s Brant Point Investment Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now review hedge fund activity in other stocks similar to HCA Healthcare Inc (NYSE:HCA). We will take a look at S&P Global Inc. (NYSE:SPGI), Ecolab Inc. (NYSE:ECL), Northrop Grumman Corporation (NYSE:NOC), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). This group of stocks’ market caps are similar to HCA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPGI 54 2920608 0
ECL 27 1832310 4
NOC 29 644842 -4
VRTX 39 2270792 -2
Average 37.25 1917138 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1917 million. That figure was $2708 million in HCA’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Ecolab Inc. (NYSE:ECL) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks HCA Healthcare Inc (NYSE:HCA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately HCA wasn’t in this group. Hedge funds that bet on HCA were disappointed as the stock returned 6.7% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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