Hedge Funds Are Crazy About WellCare Health Plans, Inc. (WCG)

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards WellCare Health Plans, Inc. (NYSE:WCG).

Is WellCare Health Plans, Inc. (NYSE:WCG) a bargain? Money managers are buying. The number of long hedge fund positions rose by 5 in recent months. Our calculations also showed that wcg isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Let’s take a look at the latest hedge fund action encompassing WellCare Health Plans, Inc. (NYSE:WCG).

What does the smart money think about WellCare Health Plans, Inc. (NYSE:WCG)?

At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WCG over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with WCG Positions

The largest stake in WellCare Health Plans, Inc. (NYSE:WCG) was held by Renaissance Technologies, which reported holding $324.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $320.7 million position. Other investors bullish on the company included GLG Partners, Marshall Wace LLP, and Columbus Circle Investors.

Consequently, specific money managers have jumped into WellCare Health Plans, Inc. (NYSE:WCG) headfirst. Partner Fund Management, managed by Christopher James, initiated the biggest position in WellCare Health Plans, Inc. (NYSE:WCG). Partner Fund Management had $38.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $21.3 million position during the quarter. The following funds were also among the new WCG investors: D. E. Shaw’s D E Shaw, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Joel Greenblatt’s Gotham Asset Management.

Let’s also examine hedge fund activity in other stocks similar to WellCare Health Plans, Inc. (NYSE:WCG). These stocks are D.R. Horton, Inc. (NYSE:DHI), American Water Works Company, Inc. (NYSE:AWK), KLA-Tencor Corporation (NASDAQ:KLAC), and Loews Corporation (NYSE:L). All of these stocks’ market caps match WCG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DHI 49 2084932 13
AWK 20 503256 1
KLAC 27 909190 1
L 24 423464 5
Average 30 980211 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $980 million. That figure was $1.71 billion in WCG’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand American Water Works Company, Inc. (NYSE:AWK) is the least popular one with only 20 bullish hedge fund positions. WellCare Health Plans, Inc. (NYSE:WCG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DHI might be a better candidate to consider a long position.

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