Is CHNG Stock A Buy or Sell?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Change Healthcare Inc. (NASDAQ:CHNG).

Is CHNG stock a buy or sell? Change Healthcare Inc. (NASDAQ:CHNG) was in 45 hedge funds’ portfolios at the end of December. The all time high for this statistic is 49. CHNG has experienced a decrease in hedge fund sentiment recently. There were 49 hedge funds in our database with CHNG holdings at the end of September. Our calculations also showed that CHNG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

David Einhorn of Greenlight Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding Change Healthcare Inc. (NASDAQ:CHNG).

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

At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHNG over the last 22 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Camber Capital Management was the largest shareholder of Change Healthcare Inc. (NASDAQ:CHNG), with a stake worth $242.5 million reported as of the end of December. Trailing Camber Capital Management was Eminence Capital, which amassed a stake valued at $156.4 million. Cardinal Capital, P2 Capital Partners, and Greenlight 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 8.51% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, setting aside 7.62 percent of its 13F equity portfolio to CHNG.

Seeing as Change Healthcare Inc. (NASDAQ:CHNG) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their full holdings by the end of the fourth quarter. Interestingly, Jeffrey Jacobowitz’s Simcoe Capital Management sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $32.3 million in stock, and Eli Samaha’s Madison Avenue Partners was right behind this move, as the fund dumped about $16.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Change Healthcare Inc. (NASDAQ:CHNG) but similarly valued. We will take a look at Duck Creek Technologies, Inc. (NASDAQ:DCT), Huaneng Power International Inc (NYSE:HNP), Skechers USA Inc (NYSE:SKX), TCF Financial Corporation (NASDAQ:TCF), Texas Pacific Land Corporation (NYSE:TPL), Marriott Vacations Worldwide Corporation (NYSE:VAC), and Helen of Troy Limited (NASDAQ:HELE). 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
DCT 22 262672 1
HNP 2 2064 0
SKX 31 572794 3
TCF 14 230307 3
TPL 11 1196136 -2
VAC 21 509101 4
HELE 19 199444 -8
Average 17.1 424645 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $1503 million in CHNG’s case. Skechers USA Inc (NYSE:SKX) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 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 78.6. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on CHNG as the stock returned 22% since the end of December (through 3/19) 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.

Follow Change Healthcare Inc. (NASDAQ:CHNG)

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