The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Addus Homecare Corporation (NASDAQ:ADUS) and determine whether the smart money was really smart about this stock.
Is Addus Homecare Corporation (NASDAQ:ADUS) ready to rally soon? The smart money was getting more bullish. The number of long hedge fund positions increased by 4 recently. Addus Homecare Corporation (NASDAQ:ADUS) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that ADUS 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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 encompassing Addus Homecare Corporation (NASDAQ:ADUS).
How are hedge funds trading Addus Homecare Corporation (NASDAQ:ADUS)?
Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in ADUS a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Addus Homecare Corporation (NASDAQ:ADUS) was held by Polar Capital, which reported holding $27.2 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $7.6 million position. Other investors bullish on the company included Columbus Circle Investors, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Cloverdale Capital Management allocated the biggest weight to Addus Homecare Corporation (NASDAQ:ADUS), around 2.01% of its 13F portfolio. Cruiser Capital Advisors is also relatively very bullish on the stock, dishing out 0.74 percent of its 13F equity portfolio to ADUS.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the most valuable position in Addus Homecare Corporation (NASDAQ:ADUS). Millennium Management had $4.6 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Anand Parekh’s Alyeska Investment Group, and Michael Gelband’s ExodusPoint Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Addus Homecare Corporation (NASDAQ:ADUS) but similarly valued. We will take a look at Patrick Industries, Inc. (NASDAQ:PATK), Range Resources Corp. (NYSE:RRC), The Geo Group, Inc. (NYSE:GEO), Meritor Inc (NYSE:MTOR), Enviva Partners, LP (NYSE:EVA), Sunnova Energy International Inc. (NYSE:NOVA), and Amneal Pharmaceuticals, Inc. (NYSE:AMRX). This group of stocks’ market values are similar to ADUS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $68 million in ADUS’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 8 bullish hedge fund positions. Addus Homecare Corporation (NASDAQ:ADUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADUS is 69.4. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ADUS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ADUS were disappointed as the stock returned 2.1% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.