Is CHNG A Good Stock To Buy Now?

Is Change Healthcare Inc. (NASDAQ:CHNG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is CHNG a good stock to buy now? Change Healthcare Inc. (NASDAQ:CHNG) was in 49 hedge funds’ portfolios at the end of September. The all time high for this statistic is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CHNG investors should be aware of an increase in enthusiasm from smart money in recent months. There were 47 hedge funds in our database with CHNG holdings at the end of June. Our calculations also showed that CHNG 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

Ricky Sandler of Eminence Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding Change Healthcare Inc. (NASDAQ:CHNG).

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

Heading into the fourth quarter of 2020, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHNG over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Camber Capital Management held the most valuable stake in Change Healthcare Inc. (NASDAQ:CHNG), which was worth $217.7 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $210.5 million worth of shares. P2 Capital Partners, Park West Asset Management, and Cardinal Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Change Healthcare Inc. (NASDAQ:CHNG), around 11.48% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, dishing out 7.4 percent of its 13F equity portfolio to CHNG.

Consequently, key hedge funds have jumped into Change Healthcare Inc. (NASDAQ:CHNG) headfirst. OrbiMed Advisors, established the most valuable position in Change Healthcare Inc. (NASDAQ:CHNG). OrbiMed Advisors had $44.9 million invested in the company at the end of the quarter. Will Cook’s Sunriver Management also made a $39.9 million investment in the stock during the quarter. The other funds with brand new CHNG positions are Michael Doheny’s Freshford Capital Management, Brett Huckelbridge’s Steel Canyon Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks similar to Change Healthcare Inc. (NASDAQ:CHNG). We will take a look at Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Douglas Emmett, Inc. (NYSE:DEI), Schneider National, Inc. (NYSE:SNDR), Jamf Holding Corp. (NASDAQ:JAMF), People’s United Financial, Inc. (NASDAQ:PBCT), Eaton Vance Corp (NYSE:EV), and Kemper Corporation (NYSE:KMPR). This group of stocks’ market values match CHNG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARWR 22 189480 1
DEI 24 591201 -3
SNDR 15 142116 -2
JAMF 15 175008 15
PBCT 22 115576 -2
EV 23 199927 -5
KMPR 18 41509 2
Average 19.9 207831 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $1361 million in CHNG’s case. Douglas Emmett, Inc. (NYSE:DEI) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Change Healthcare Inc. (NASDAQ:CHNG) is more popular among hedge funds. Our overall hedge fund sentiment score for CHNG is 87. 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 returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on CHNG as the stock returned 20.7% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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