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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Chemed Corporation (NYSE:CHE).
Chemed Corporation (NYSE:CHE) investors should pay attention to an increase in hedge fund interest lately. CHE was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with CHE holdings at the end of the previous quarter. Our calculations also showed that CHE 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 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 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 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.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Now we’re going to take a look at the recent hedge fund action encompassing Chemed Corporation (NYSE:CHE).
How have hedgies been trading Chemed Corporation (NYSE:CHE)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHE over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Chemed Corporation (NYSE:CHE). Fisher Asset Management has a $126.5 million position in the stock, comprising 0.2% of its 13F portfolio. On Fisher Asset Management’s heels is Renaissance Technologies, which holds a $120.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism comprise Mario Gabelli’s GAMCO Investors, Ken Griffin’s Citadel Investment Group and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Chemed Corporation (NYSE:CHE), around 1.12% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.42 percent of its 13F equity portfolio to CHE.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Miura Global Management, managed by Pasco Alfaro / Richard Tumure, initiated the most valuable position in Chemed Corporation (NYSE:CHE). Miura Global Management had $4.3 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with brand new CHE positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Greg Eisner’s Engineers Gate Manager, and Hoon Kim’s Quantinno Capital.
Let’s go over hedge fund activity in other stocks similar to Chemed Corporation (NYSE:CHE). We will take a look at Vornado Realty Trust (NYSE:VNO), WABCO Holdings Inc. (NYSE:WBC), AngloGold Ashanti Limited (NYSE:AU), and Luckin Coffee Inc. (NASDAQ:LK). All of these stocks’ market caps match CHE’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 28 hedge funds with bullish positions and the average amount invested in these stocks was $769 million. That figure was $381 million in CHE’s case. Luckin Coffee Inc. (NASDAQ:LK) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 19 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. 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately CHE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CHE investors were disappointed as the stock returned 3.6% 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.