Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Amedisys Inc (NASDAQ:AMED).
Is AMED a good stock to buy now? Amedisys Inc (NASDAQ:AMED) has seen an increase in support from the world’s most elite money managers of late. Amedisys Inc (NASDAQ:AMED) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. Our calculations also showed that AMED isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we’re going to take a glance at the recent hedge fund action surrounding Amedisys Inc (NASDAQ:AMED).
Do Hedge Funds Think AMED Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMED over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Amedisys Inc (NASDAQ:AMED) was held by D E Shaw, which reported holding $70.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $45.4 million position. Other investors bullish on the company included Two Sigma Advisors, Redmile Group, and Millennium Management. In terms of the portfolio weights assigned to each position Sivik Global Healthcare allocated the biggest weight to Amedisys Inc (NASDAQ:AMED), around 1.53% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 1.35 percent of its 13F equity portfolio to AMED.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, established the most valuable position in Amedisys Inc (NASDAQ:AMED). Woodline Partners had $14.1 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also made a $4.7 million investment in the stock during the quarter. The other funds with brand new AMED positions are Ray Dalio’s Bridgewater Associates, Jinghua Yan’s TwinBeech Capital, and Mika Toikka’s AlphaCrest Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Amedisys Inc (NASDAQ:AMED) but similarly valued. We will take a look at Mylan Inc. (NASDAQ:MYL), Chemed Corporation (NYSE:CHE), Banco de Chile (NYSE:BCH), Amdocs Limited (NASDAQ:DOX), Host Hotels and Resorts Inc (NASDAQ:HST), Pentair plc (NYSE:PNR), and New Fortress Energy Inc. (NASDAQ:NFE). This group of stocks’ market caps match AMED’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $344 million in AMED’s case. Mylan Inc. (NASDAQ:MYL) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 4 bullish hedge fund positions. Amedisys Inc (NASDAQ:AMED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMED is 65.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AMED as the stock returned 22.6% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.