At Insider Monkey, we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
McKesson Corporation (NYSE:MCK) was in 68 hedge funds’ portfolios at the end of September. McKesson Corporation (NYSE:MCK) has experienced an increase in activity from the world’s largest hedge funds lately. There were 62 hedge funds in our database with McKesson Corporation (NYSE:MCK) positions at the end of the previous quarter. At the end of this article, we will also compare McKesson Corporation (NYSE:MCK) to other stocks, including Carnival PLC (ADR) (NYSE:CUK), Dominion Resources, Inc. (NYSE:D), and Phillips 66 (NYSE:PSX) to get a better sense of its popularity.
According to most traders, hedge funds are assumed to be slow, outdated financial tools of the past. While there are more than 8000 funds in operation today, Our researchers choose to focus on the crème de la crème of this group, around 700 funds. Most estimates calculate that this group of people oversees the lion’s share of all hedge funds’ total asset base, and by monitoring their top picks, Insider Monkey has come up with a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s analyze the latest action surrounding McKesson Corporation (NYSE:MCK).
Hedge fund activity in McKesson Corporation (NYSE:MCK)
Heading into Q4, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 10% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Andreas Halvorsen’s Viking Global has the number one position in McKesson Corporation (NYSE:MCK), worth close to $420.8 million, amounting to 1.6% of its total 13F portfolio. The second most bullish fund manager is Glenview Capital, led by Larry Robbins, holding a $335 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include D E Shaw, Daniel S. Och’s OZ Management and Cliff Asness’ AQR Capital Management.
As one would reasonably expect, specific money managers were breaking ground themselves. Southpoint Capital Advisors, managed by John Smith Clark, initiated the most valuable position in McKesson Corporation (NYSE:MCK). Southpoint Capital Advisors had $148 million invested in the company at the end of the quarter. Jacob Gottlieb’s Visium Asset Management also initiated a $118.1 million position during the quarter. The other funds with new positions in the stock are Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Curtis Macnguyen’s Ivory Capital (Investment Mgmt), and David S. Winter and David J. Millstone’s 40 North Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as McKesson Corporation (NYSE:MCK) but similarly valued. These stocks are Carnival plc (ADR) (NYSE:CUK), Dominion Resources, Inc. (NYSE:D), Phillips 66 (NYSE:PSX), and Shire PLC (ADR) (NASDAQ:SHPG). This group of stocks’ market values matches McKesson Corporation (NYSE:MCK)’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $2.41 billion. That figure was $3.32 billion in McKesson Corporation (NYSE:MCK)’s case. Shire PLC (ADR) (NASDAQ:SHPG) is the most popular stock in this table. On the other hand, Carnival plc (ADR) (NYSE:CUK) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks, McKesson Corporation (NYSE:MCK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.