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Hedge Funds Starting To Cash Out Of Henry Schein, Inc. (HSIC)

In this article you are going to find out whether hedge funds think Henry Schein, Inc. (NASDAQ:HSIC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Henry Schein, Inc. (NASDAQ:HSIC) investors should pay attention to a decrease in hedge fund interest of late. Our calculations also showed that HSIC 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.

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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Henry Schein, Inc. (NASDAQ:HSIC).

Hedge fund activity in Henry Schein, Inc. (NASDAQ:HSIC)

At the end of the first quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HSIC over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is HSIC A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the number one position in Henry Schein, Inc. (NASDAQ:HSIC). Generation Investment Management has a $668.7 million position in the stock, comprising 4.7% of its 13F portfolio. The second largest stake is held by Robert Joseph Caruso of Select Equity Group, with a $119.5 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions contain Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Henry Schein, Inc. (NASDAQ:HSIC), around 4.75% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to HSIC.

Since Henry Schein, Inc. (NASDAQ:HSIC) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that elected to cut their entire stakes last quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest position of the 750 funds watched by Insider Monkey, totaling an estimated $3.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $3.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut 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 Henry Schein, Inc. (NASDAQ:HSIC) but similarly valued. We will take a look at Centrais Eletricas Brasileiras SA (NYSE:EBR), Avantor, Inc. (NYSE:AVTR), Ceridian HCM Holding Inc. (NYSE:CDAY), and Tenaris S.A. (NYSE:TS). This group of stocks’ market valuations resemble HSIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EBR 5 9710 -2
AVTR 29 521496 1
CDAY 24 1189081 -7
TS 15 212792 -1
Average 18.25 483270 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $1059 million in HSIC’s case. Avantor, Inc. (NYSE:AVTR) is the most popular stock in this table. On the other hand Centrais Eletricas Brasileiras SA (NYSE:EBR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Henry Schein, Inc. (NASDAQ:HSIC) is more popular among hedge funds. 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on HSIC, though not to the same extent, as the stock returned 20.2% in Q2 (through the end of May) and outperformed the market as well.

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