Is FMS A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is FMS a good stock to buy now? Investors who are in the know were getting more bullish. The number of bullish hedge fund bets went up by 3 in recent months. Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that FMS 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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Ken Griffin of Citadel Investment Group

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. Keeping this in mind let’s take a look at the key hedge fund action encompassing Fresenius Medical Care AG & Co. KGaA (NYSE:FMS).

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

Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in FMS a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), which was worth $4.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $4.1 million worth of shares. Marshall Wace LLP, Quantamental Technologies, and Balyasny Asset Management 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 Quantamental Technologies allocated the biggest weight to Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), around 0.69% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to FMS.

As one would reasonably expect, specific money managers have jumped into Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Fresenius Medical Care AG & Co. KGaA (NYSE:FMS). Marshall Wace LLP had $3.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $0.9 million position during the quarter. The only other fund with a new position in the stock is D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) but similarly valued. We will take a look at Fastenal Company (NASDAQ:FAST), McCormick & Company, Incorporated (NYSE:MKC), Archer Daniels Midland Company (NYSE:ADM), BeiGene, Ltd. (NASDAQ:BGNE), Liberty Broadband Corp (NASDAQ:LBRDA), Align Technology, Inc. (NASDAQ:ALGN), and TransDigm Group Incorporated (NYSE:TDG). This group of stocks’ market values resemble FMS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FAST 38 700349 4
MKC 37 315538 5
ADM 26 673303 -2
BGNE 13 5585118 0
LBRDA 25 862989 3
ALGN 47 2164625 6
TDG 64 6121503 2
Average 35.7 2346204 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $2346 million. That figure was $14 million in FMS’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is even less popular than BGNE. Our overall hedge fund sentiment score for FMS is 32.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards FMS. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16.2 percentage points. Unfortunately FMS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FMS investors were disappointed as the stock returned -2.2% since the end of the third quarter (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 so far in 2020.

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