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Hedge Funds Are Selling Chemed Corporation (CHE)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Chemed Corporation (NYSE:CHE).

Is Chemed Corporation (NYSE:CHE) a marvelous stock to buy now? The smart money is getting less optimistic. The number of long hedge fund positions fell by 1 recently. Our calculations also showed that CHE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CHE was in 22 hedge funds’ portfolios at the end of December. There were 23 hedge funds in our database with CHE holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the key hedge fund action surrounding Chemed Corporation (NYSE:CHE).

How are hedge funds trading Chemed Corporation (NYSE:CHE)?

At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHE over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Chemed Corporation (NYSE:CHE), worth close to $130.3 million, amounting to 0.1% of its total 13F portfolio. On Fisher Asset Management’s heels is Renaissance Technologies, with a $86.4 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Ken Griffin’s Citadel Investment Group, Noam Gottesman’s GLG Partners and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Chemed Corporation (NYSE:CHE), around 0.34% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to CHE.

Seeing as Chemed Corporation (NYSE:CHE) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds who sold off their positions entirely last quarter. Intriguingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, valued at close to $0.6 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund cut about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Chemed Corporation (NYSE:CHE) but similarly valued. These stocks are Perrigo Company (NYSE:PRGO), PRA Health Sciences Inc (NASDAQ:PRAH), The Madison Square Garden Company (NYSE:MSG), and Sociedad Quimica y Minera (NYSE:SQM). This group of stocks’ market values are similar to CHE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRGO 27 237292 11
PRAH 38 362811 3
MSG 43 1919597 -4
SQM 13 44514 5
Average 30.25 641054 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $400 million in CHE’s case. The Madison Square Garden Company (NYSE:MSG) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera (NYSE:SQM) is the least popular one with only 13 bullish hedge fund positions. Chemed Corporation (NYSE:CHE) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on CHE as the stock returned -16.8% during the same time period and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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