Is Community Health Systems (CYH) A Good Stock To Buy?

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from small-cap stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Community Health Systems (NYSE:CYH) was in 59 hedge funds’ portfolios at the end of September. CYH shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. There were 61 hedge funds in our database with CYH positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TFS Financial Corporation (NASDAQ:TFSL), Herbalife Ltd. (NYSE:HLF), and Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) to gather more data points.

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Now, we’re going to analyze the key action encompassing Community Health Systems (NYSE:CYH).

What have hedge funds been doing with Community Health Systems (NYSE:CYH)?

Heading into Q4, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 3% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Glenview Capital, managed by Larry Robbins, holds the most valuable position in Community Health Systems (NYSE:CYH). Glenview Capital has a $517.3 million position in the company, comprising 2.6% of its 13F portfolio. The second largest stake is held by Samuel Isaly of OrbiMed Advisors, with a $116.3 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Richard Perry’s Perry Capital, Jacob Doft’s Highline Capital Management and Dinakar Singh’s TPG-AXON Management LP.

Due to the fact that Community Health Systems (NYSE:CYH) has experienced falling interest from the smart money, we can see that there was a specific group of hedge funds that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Conan Laughlin’s North Tide Capital cut the biggest investment of the 700 funds tracked by Insider Monkey, comprising an estimated $63 million in stock, and Christopher James of Partner Fund Management was right behind this move, as the fund dropped about $13.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Community Health Systems (NYSE:CYH) but similarly valued. We will take a look at TFS Financial Corporation (NASDAQ:TFSL), Herbalife Ltd. (NYSE:HLF), Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), and KAR Auction Services Inc (NYSE:KAR). This group of stocks’ market caps are similar to CYH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TFSL 14 229151 1
HLF 32 1666878 -2
GOL 5 15528 -4
KAR 44 1239158 2

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $788 million. That figure was $1,171 million in CYH’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks, Community Health Systems (NYSE:CYH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze CYH in more detail despite the slight drop off in the total number of hedge funds who were long Community Health Systems at the end of the third quarter.