How McKesson Corporation (MCK) Stacks Up Against Its Peers

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we will take a closer look at McKesson Corporation (NYSE:MCK) from the perspective of those investors.

McKesson Corporation (NYSE:MCK) registered a decrease in activity from the world’s largest hedge funds of late. There were 59 investors long the stock at the end of September, down from 66 hedge funds in our database with MCK holdings a quarter earlier. At the end of this article we will also compare MCK to other stocks including Automatic Data Processing (NASDAQ:ADP), The Bank of New York Mellon Corporation (NYSE:BK), and Kinder Morgan Inc (NYSE:KMI) to get a better sense of its popularity.

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Now, let’s view the new action surrounding McKesson Corporation (NYSE:MCK).

How have hedgies been trading McKesson Corporation (NYSE:MCK)?

As mentioned previously, during the third quarter, the number of investors long McKesson Corporation declined by 11% to 59. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Smith Clark’s Southpoint Capital Advisors has the number one position in McKesson Corporation (NYSE:MCK), worth close to $208.4 million, accounting for 9.3% of its total 13F portfolio. On Southpoint Capital Advisors’s heels is PAR Capital Management, led by Paul Reeder and Edward Shapiro, holding a $176.8 million position; 2.6% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise Cliff Asness’ AQR Capital Management, Jim Simons’ Renaissance Technologies, and John Overdeck and David Siegel’s Two Sigma Advisors.

Due to the fact that McKesson Corporation (NYSE:MCK) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that slashed their entire stakes between July and September. Doug Silverman and Alexander Klabin’s Senator Investment Group cut the largest position of all the hedgies watched by Insider Monkey, comprising close to $112 million in stock. William B. Gray’s fund, Orbis Investment Management, also sold off its stock, about $74.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by seven funds during the third quarter.

Let’s check out hedge fund activity in other stocks similar to McKesson Corporation (NYSE:MCK). These stocks are Automatic Data Processing (NASDAQ:ADP), The Bank of New York Mellon Corporation (NYSE:BK), Kinder Morgan Inc (NYSE:KMI), and Phillips 66 (NYSE:PSX). This group of stocks’ market caps are similar to MCK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADP 32 817244 -2
BK 47 3520476 6
KMI 68 2836616 15
PSX 29 7315837 3

As you can see these stocks had an average of 44 funds with long positions at the end of September and the average amount invested in these stocks was $3.62 billion. That figure was $1.50 billion in McKesson’s case. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand Phillips 66 (NYSE:PSX) is the least popular one with only 29 funds holding shares. McKesson Corporation (NYSE:MCK) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Kinder Morgan Inc (NYSE:KMI) might be a better candidate to consider a long position.