Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) to find out whether there were any major changes in hedge funds’ views.
Is Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) going to take off soon? Hedge funds were betting on the stock. The number of bullish hedge fund positions went up by 2 in recent months. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that MDRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 22 hedge funds in our database with MDRX holdings at the end of December.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
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Do Hedge Funds Think MDRX Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in MDRX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), which was worth $89.2 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $74.1 million worth of shares. Arrowstreet Capital, Renaissance Technologies, and CaaS 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 Tamarack Capital Management allocated the biggest weight to Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), around 2.69% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, designating 0.63 percent of its 13F equity portfolio to MDRX.
As aggregate interest increased, specific money managers were breaking ground themselves. Renaissance Technologies, created the biggest position in Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). Renaissance Technologies had $16.2 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also made a $15.6 million investment in the stock during the quarter. The following funds were also among the new MDRX investors: Greg Eisner’s Engineers Gate Manager, Farnum Brown and Adam Seitchik’s Arjuna Capital, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). We will take a look at MediaAlpha, Inc. (NYSE:MAX), EnLink Midstream LLC (NYSE:ENLC), Avanos Medical, Inc. (NYSE:AVNS), ModivCare Inc. (NASDAQ:MODV), Healthcare Services Group, Inc. (NASDAQ:HCSG), Silicon Motion Technology Corp. (NASDAQ:SIMO), and Four Corners Property Trust, Inc. (NYSE:FCPT). This group of stocks’ market valuations are similar to MDRX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $283 million in MDRX’s case. Silicon Motion Technology Corp. (NASDAQ:SIMO) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 11 bullish hedge fund positions. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MDRX is 80.2. 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 gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on MDRX, though not to the same extent, as the stock returned 16.6% since Q1 (through July 16th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.