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Hedge Funds Are Buying Community Health Systems, Inc. (CYH)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Community Health Systems, Inc. (NYSE:CYH) based on that data.

Is Community Health Systems, Inc. (NYSE:CYH) a buy, sell, or hold? Investors who are in the know are in a bullish mood. The number of bullish hedge fund bets moved up by 4 lately. Our calculations also showed that CYH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 today’s marketplace there are many methods stock market investors use to grade their stock investments. A pair of the best methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outclass the market by a significant margin (see the details here).

Paul Singer ELLIOTT MANAGEMENT

Paul Singer of Elliott Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Community Health Systems, Inc. (NYSE:CYH).

How have hedgies been trading Community Health Systems, Inc. (NYSE:CYH)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CYH over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, Shanda Asset Management was the largest shareholder of Community Health Systems, Inc. (NYSE:CYH), with a stake worth $91.8 million reported as of the end of September. Trailing Shanda Asset Management was Elliott Management, which amassed a stake valued at $15 million. Royce & Associates, D E Shaw, and Saba Capital 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 Shanda Asset Management allocated the biggest weight to Community Health Systems, Inc. (NYSE:CYH), around 21.2% of its 13F portfolio. Centerbridge Partners is also relatively very bullish on the stock, earmarking 1.38 percent of its 13F equity portfolio to CYH.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Shanda Asset Management, managed by Chen Tianqiao, assembled the largest position in Community Health Systems, Inc. (NYSE:CYH). Shanda Asset Management had $91.8 million invested in the company at the end of the quarter. Mark T. Gallogly’s Centerbridge Partners also initiated a $5.7 million position during the quarter. The following funds were also among the new CYH investors: Rob Citrone’s Discovery Capital Management, Greg Eisner’s Engineers Gate Manager, and Jonathan Soros’s JS Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Community Health Systems, Inc. (NYSE:CYH) but similarly valued. We will take a look at Gilat Satellite Networks Ltd. (NASDAQ:GILT), Mechel PAO (NYSE:MTL), Vapotherm, Inc. (NYSE:VAPO), and Magic Software Enterprises Ltd. (NASDAQ:MGIC). This group of stocks’ market caps resemble CYH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GILT 13 50128 11
MTL 3 1432 1
VAPO 12 100026 2
MGIC 3 4732 0
Average 7.75 39080 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $159 million in CYH’s case. Gilat Satellite Networks Ltd. (NASDAQ:GILT) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Community Health Systems, Inc. (NYSE:CYH) is more popular among hedge funds. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. Unfortunately CYH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CYH were disappointed as the stock returned -3.3% during the second quarter (through June 17th) 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 most of these stocks already outperformed the market in 2020.

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