Is CHCT A Good Stock To Buy Now?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Community Healthcare Trust Inc (NYSE:CHCT).

Is CHCT a good stock to buy now? Community Healthcare Trust Inc (NYSE:CHCT) has seen a decrease in activity from the world’s largest hedge funds lately. Community Healthcare Trust Inc (NYSE:CHCT) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 15. Our calculations also showed that CHCT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Charles Clough of Clough Capital Partners

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 let’s view the new hedge fund action regarding Community Healthcare Trust Inc (NYSE:CHCT).

Do Hedge Funds Think CHCT Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHCT over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CHCT A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Amy Minella’s Cardinal Capital has the biggest position in Community Healthcare Trust Inc (NYSE:CHCT), worth close to $42.6 million, accounting for 1.8% of its total 13F portfolio. On Cardinal Capital’s heels is Charles Clough of Clough Capital Partners, with a $24.5 million position; 1.8% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism contain Israel Englander’s Millennium Management, Mark Coe’s Intrinsic Edge Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Community Healthcare Trust Inc (NYSE:CHCT), around 1.78% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, designating 1.76 percent of its 13F equity portfolio to CHCT.

Due to the fact that Community Healthcare Trust Inc (NYSE:CHCT) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that slashed their entire stakes in the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the largest stake of the 750 funds watched by Insider Monkey, valued at an estimated $1.6 million in stock. Louis Navellier’s fund, Navellier & Associates, also sold off its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest fell by 5 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Community Healthcare Trust Inc (NYSE:CHCT) but similarly valued. These stocks are Virtus Investment Partners Inc (NASDAQ:VRTS), Evolent Health Inc (NYSE:EVH), Quanterix Corporation (NASDAQ:QTRX), Innoviva, Inc. (NASDAQ:INVA), Lakeland Financial Corporation (NASDAQ:LKFN), Materion Corp (NYSE:MTRN), and EverQuote, Inc. (NASDAQ:EVER). This group of stocks’ market caps are similar to CHCT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRTS 14 69164 4
EVH 20 209259 5
QTRX 10 75933 2
INVA 21 230768 2
LKFN 5 9688 0
MTRN 14 81395 0
EVER 21 178745 -2
Average 15 122136 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $104 million in CHCT’s case. Innoviva, Inc. (NASDAQ:INVA) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 5 bullish hedge fund positions. Community Healthcare Trust Inc (NYSE:CHCT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHCT is 35.6. 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. 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 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately CHCT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CHCT investors were disappointed as the stock returned 1.3% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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