Hedge Funds Have Never Been This Bullish On Magellan Health Inc (MGLN)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Magellan Health Inc (NASDAQ:MGLN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Magellan Health Inc (NASDAQ:MGLN) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MGLN shareholders have witnessed an increase in enthusiasm from smart money lately. There were 15 hedge funds in our database with MGLN holdings at the end of March. Our calculations also showed that MGLN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to review the latest hedge fund action encompassing Magellan Health Inc (NASDAQ:MGLN).

Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from the first quarter of 2020. On the other hand, there were a total of 19 hedge funds with a bullish position in MGLN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Starboard Value LP held the most valuable stake in Magellan Health Inc (NASDAQ:MGLN), which was worth $172.9 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $77.8 million worth of shares. Renaissance Technologies, Hawk Ridge Management, and D E Shaw 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 Starboard Value LP allocated the biggest weight to Magellan Health Inc (NASDAQ:MGLN), around 6.16% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, setting aside 3.52 percent of its 13F equity portfolio to MGLN.

As industrywide interest jumped, some big names have jumped into Magellan Health Inc (NASDAQ:MGLN) headfirst. Hawk Ridge Management, managed by David Brown, established the biggest position in Magellan Health Inc (NASDAQ:MGLN). Hawk Ridge Management had $29.8 million invested in the company at the end of the quarter. Glenn W. Welling’s Engaged Capital also made a $14.3 million investment in the stock during the quarter. The following funds were also among the new MGLN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jonathan Soros’s JS Capital, and Brian Ashford-Russell and Tim Woolley’s Polar Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Magellan Health Inc (NASDAQ:MGLN) but similarly valued. These stocks are Healthcare Services Group, Inc. (NASDAQ:HCSG), International Game Technology PLC (NYSE:IGT), Olin Corporation (NYSE:OLN), Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Uniti Group Inc. (NASDAQ:UNIT), Immunovant, Inc. (NASDAQ:IMVT), and PQ Group Holdings Inc. (NYSE:PQG). All of these stocks’ market caps resemble MGLN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCSG 27 126575 7
IGT 23 96618 -2
OLN 33 448219 0
OMAB 4 34250 0
UNIT 17 79043 4
IMVT 31 330242 3
PQG 6 46807 -1
Average 20.1 165965 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $419 million in MGLN’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 4 bullish hedge fund positions. Magellan Health Inc (NASDAQ:MGLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGLN is 72.8. 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. This is a slightly positive signal but 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately MGLN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MGLN were disappointed as the stock returned 3.8% in Q3 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 many of these stocks already outperformed the market so far this year.

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