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

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 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded U.S. Physical Therapy, Inc. (NYSE:USPH) and determine whether the smart money was really smart about this stock.

U.S. Physical Therapy, Inc. (NYSE:USPH) has experienced a decrease in enthusiasm from smart money recently. Our calculations also showed that USPH 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action encompassing U.S. Physical Therapy, Inc. (NYSE:USPH).

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

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in USPH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of U.S. Physical Therapy, Inc. (NYSE:USPH), with a stake worth $14.7 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $6.9 million. Citadel Investment Group, Millennium Management, and Winton Capital 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 Royce & Associates allocated the biggest weight to U.S. Physical Therapy, Inc. (NYSE:USPH), around 0.09% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to USPH.

Seeing as U.S. Physical Therapy, Inc. (NYSE:USPH) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who were dropping their positions entirely last quarter. Intriguingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $11.6 million in stock, and Christiana Goh Bardon’s Burrage Capital Management was right behind this move, as the fund cut about $2.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as U.S. Physical Therapy, Inc. (NYSE:USPH) but similarly valued. We will take a look at Hertz Global Holdings, Inc. (NYSE:HTZ), Suburban Propane Partners LP (NYSE:SPH), Piper Sandler Companies (NYSE:PIPR), and Varex Imaging Corporation (NASDAQ:VREX). All of these stocks’ market caps are closest to USPH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HTZ 24 515179 -9
SPH 4 40581 -1
PIPR 12 30150 1
VREX 19 67850 0
Average 14.75 163440 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $33 million in USPH’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 4 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately USPH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); USPH investors were disappointed as the stock returned 17.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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