Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Henry Schein, Inc. (NASDAQ:HSIC) to find out whether there were any major changes in hedge funds’ views.
Is HSIC a good stock to buy now? Henry Schein, Inc. (NASDAQ:HSIC) investors should be aware of an increase in activity from the world’s largest hedge funds lately. Henry Schein, Inc. (NASDAQ:HSIC) was in 40 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HSIC 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. With all of this in mind let’s take a glance at the latest hedge fund action encompassing Henry Schein, Inc. (NASDAQ:HSIC).
Do Hedge Funds Think HSIC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in HSIC a year ago. 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, Generation Investment Management held the most valuable stake in Henry Schein, Inc. (NASDAQ:HSIC), which was worth $789.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $133.7 million worth of shares. AQR Capital Management, Millennium Management, and D E Shaw 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 Generation Investment Management allocated the biggest weight to Henry Schein, Inc. (NASDAQ:HSIC), around 4.19% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, designating 1.09 percent of its 13F equity portfolio to HSIC.
Consequently, key hedge funds have jumped into Henry Schein, Inc. (NASDAQ:HSIC) headfirst. Park West Asset Management, managed by Peter S. Park, assembled the biggest position in Henry Schein, Inc. (NASDAQ:HSIC). Park West Asset Management had $25.5 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $23.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Qing Li’s Sciencast Management, and Peter Muller’s PDT Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Henry Schein, Inc. (NASDAQ:HSIC). These stocks are Pinnacle West Capital Corporation (NYSE:PNW), China Southern Airlines Co Ltd (NYSE:ZNH), Formula One Group (NASDAQ:FWONA), Trex Company, Inc. (NYSE:TREX), News Corp (NASDAQ:NWSA), Weibo Corp (NASDAQ:WB), and Textron Inc. (NYSE:TXT). This group of stocks’ market caps resemble HSIC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $1234 million in HSIC’s case. News Corp (NASDAQ:NWSA) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Henry Schein, Inc. (NASDAQ:HSIC) is more popular among hedge funds. Our overall hedge fund sentiment score for HSIC is 90. 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 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on HSIC as the stock returned 15.8% since the end of September (through 12/14) 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.
Disclosure: None. This article was originally published at Insider Monkey.