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Hedge Funds Are Crazy About U.S. Physical Therapy, Inc. (USPH)

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 18.7% compared to 12.1%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Is U.S. Physical Therapy, Inc. (NYSE:USPH) a buy right now? The best stock pickers are becoming more confident. The number of bullish hedge fund bets increased by 2 lately. Our calculations also showed that USPH isn’t among the 30 most popular stocks among hedge funds. USPH was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with USPH positions at the end of the previous quarter.

To most investors, hedge funds are assumed to be unimportant, old investment tools of yesteryear. While there are greater than 8000 funds trading at present, We look at the crème de la crème of this club, approximately 750 funds. It is estimated that this group of investors orchestrate most of the smart money’s total asset base, and by tracking their top picks, Insider Monkey has spotted several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

AlphaOne Capital Partners' Returns, AUM and Holdings

Let’s check out the key hedge fund action surrounding U.S. Physical Therapy, Inc. (NYSE:USPH).

What does smart money think about U.S. Physical Therapy, Inc. (NYSE:USPH)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in USPH over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

USPH_jun2019

More specifically, Renaissance Technologies was the largest shareholder of U.S. Physical Therapy, Inc. (NYSE:USPH), with a stake worth $54.5 million reported as of the end of March. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $12.9 million. Citadel Investment Group, AlphaOne Capital Partners, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds were breaking ground themselves. D E Shaw, managed by D. E. Shaw, assembled the largest position in U.S. Physical Therapy, Inc. (NYSE:USPH). D E Shaw had $0.6 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new USPH position is Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks similar to U.S. Physical Therapy, Inc. (NYSE:USPH). We will take a look at Bandwidth Inc. (NASDAQ:BAND), Phibro Animal Health Corp (NASDAQ:PAHC), Scholastic Corp (NASDAQ:SCHL), and Inspire Medical Systems, Inc. (NYSE:INSP). This group of stocks’ market values match USPH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BAND 23 209148 4
PAHC 18 64469 -2
SCHL 10 91861 -3
INSP 18 254212 3
Average 17.25 154923 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $78 million in USPH’s case. Bandwidth Inc. (NASDAQ:BAND) is the most popular stock in this table. On the other hand Scholastic Corp (NASDAQ:SCHL) is the least popular one with only 10 bullish hedge fund positions. U.S. Physical Therapy, Inc. (NYSE:USPH) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on USPH as the stock returned 13.9% during the same time frame and outperformed the market by an even larger margin.

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

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