Hedge Funds Are Checking Out Of HCA Healthcare Inc (HCA)

In this article we will take a look at whether hedge funds think HCA Healthcare Inc (NYSE:HCA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is HCA Healthcare Inc (NYSE:HCA) a buy here? Money managers were in a bearish mood. The number of long hedge fund positions retreated by 11 in recent months. HCA Healthcare Inc (NYSE:HCA) was in 62 hedge funds’ portfolios at the end of March. The all time high for this statistic is 87. Our calculations also showed that HCA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 73 hedge funds in our database with HCA holdings at the end of December.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. 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 homepage. Keeping this in mind let’s review the key hedge fund action surrounding HCA Healthcare Inc (NYSE:HCA).

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

At the end of March, a total of 62 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HCA over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Lyrical Asset Management was the largest shareholder of HCA Healthcare Inc (NYSE:HCA), with a stake worth $397.6 million reported as of the end of March. Trailing Lyrical Asset Management was Arrowstreet Capital, which amassed a stake valued at $335.9 million. Viking Global, Brave Warrior Capital, and Glenview 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 Abrams Bison Investments allocated the biggest weight to HCA Healthcare Inc (NYSE:HCA), around 17.63% of its 13F portfolio. Cryder Capital is also relatively very bullish on the stock, designating 12.82 percent of its 13F equity portfolio to HCA.

Judging by the fact that HCA Healthcare Inc (NYSE:HCA) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that decided to sell off their positions entirely by the end of the first quarter. Intriguingly, Kevin Molloy’s Iron Triangle Partners cut the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $46 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also said goodbye to its stock, about $45.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 11 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as HCA Healthcare Inc (NYSE:HCA) but similarly valued. These stocks are Equinor ASA (NYSE:EQNR), VMware, Inc. (NYSE:VMW), Intercontinental Exchange Inc (NYSE:ICE), Air Products & Chemicals, Inc. (NYSE:APD), Marsh & McLennan Companies, Inc. (NYSE:MMC), ABB Ltd (NYSE:ABB), and Ecolab Inc. (NYSE:ECL). This group of stocks’ market values are closest to HCA’s market value.

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As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $1382 million. That figure was $3245 million in HCA’s case. Intercontinental Exchange Inc (NYSE:ICE) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks HCA Healthcare Inc (NYSE:HCA) is more popular among hedge funds. Our overall hedge fund sentiment score for HCA is 65.4. 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. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on HCA as the stock returned 12.4% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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