Here’s What Hedge Funds Think About Magellan Health Inc (MGLN)

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2018. What do these smart investors think about Magellan Health Inc (NASDAQ:MGLN)?

Magellan Health Inc (NASDAQ:MGLN) investors should be aware of a decrease in hedge fund interest recently. MGLN was in 15 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with MGLN positions at the end of the previous quarter. Our calculations also showed that MGLN isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glenn Welling Engaged Capital

Let’s take a look at the fresh hedge fund action surrounding Magellan Health Inc (NASDAQ:MGLN).

What does the smart money think about Magellan Health Inc (NASDAQ:MGLN)?

At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in MGLN over the last 14 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).


The largest stake in Magellan Health Inc (NASDAQ:MGLN) was held by Starboard Value LP, which reported holding $120.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $65 million position. Other investors bullish on the company included Point72 Asset Management, D E Shaw, and Two Sigma Advisors.

Because Magellan Health Inc (NASDAQ:MGLN) has experienced bearish sentiment from hedge fund managers, logic holds that there is a sect of funds who sold off their full holdings heading into Q3. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest position of the 700 funds tracked by Insider Monkey, valued at close to $10.3 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund said goodbye to about $2.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Magellan Health Inc (NASDAQ:MGLN). These stocks are SecureWorks Corp. (NASDAQ:SCWX), Mirati Therapeutics, Inc. (NASDAQ:MRTX), Employers Holdings, Inc. (NYSE:EIG), and G-III Apparel Group, Ltd. (NASDAQ:GIII). This group of stocks’ market values are closest to MGLN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SCWX 9 35899 1
MRTX 27 609808 3
EIG 18 77399 3
GIII 13 103115 -4
Average 16.75 206555 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $300 million in MGLN’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand SecureWorks Corp. (NASDAQ:SCWX) is the least popular one with only 9 bullish hedge fund positions. Magellan Health Inc (NASDAQ:MGLN) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MGLN wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); MGLN investors were disappointed as the stock returned 14.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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