Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Bausch Health Companies (NYSE:BHC).
Bausch Health Companies (NYSE:BHC) was in 35 hedge funds’ portfolios at the end of the first quarter of 2020. BHC investors should be aware of an increase in activity from the world’s largest hedge funds lately. There were 31 hedge funds in our database with BHC positions at the end of the previous quarter. Our calculations also showed that BHC 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 51 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 we’re going to analyze the latest hedge fund action regarding Bausch Health Companies (NYSE:BHC).
How have hedgies been trading Bausch Health Companies (NYSE:BHC)?
At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BHC over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Paulson & Co held the most valuable stake in Bausch Health Companies (NYSE:BHC), which was worth $323 million at the end of the third quarter. On the second spot was ValueAct Capital which amassed $277.9 million worth of shares. Glenview Capital, Renaissance Technologies, and GoldenTree Asset Management 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 GoldenTree Asset Management allocated the biggest weight to Bausch Health Companies (NYSE:BHC), around 24.8% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 12.32 percent of its 13F equity portfolio to BHC.
Consequently, key money managers were breaking ground themselves. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the biggest position in Bausch Health Companies (NYSE:BHC). Healthcor Management LP had $59.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $16.8 million position during the quarter. The following funds were also among the new BHC investors: Matthew Hulsizer’s PEAK6 Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Jaime Sterne’s Skye Global Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Bausch Health Companies (NYSE:BHC) but similarly valued. These stocks are Mohawk Industries, Inc. (NYSE:MHK), Ally Financial Inc (NYSE:ALLY), Whirlpool Corporation (NYSE:WHR), and Voya Financial Inc (NYSE:VOYA). All of these stocks’ market caps match BHC’s market cap.
|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 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $675 million. That figure was $1567 million in BHC’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Whirlpool Corporation (NYSE:WHR) is the least popular one with only 25 bullish hedge fund positions. Bausch Health Companies (NYSE:BHC) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on BHC, though not to the same extent, as the stock returned 19.2% during the first two months of the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.