At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Medifast, Inc. (NYSE:MED).
Is MED a good stock to buy now? Medifast, Inc. (NYSE:MED) has experienced an increase in enthusiasm from smart money lately. Medifast, Inc. (NYSE:MED) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 28. Our calculations also showed that MED 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’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.
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. Now we’re going to check out the fresh hedge fund action encompassing Medifast, Inc. (NYSE:MED).
Do Hedge Funds Think MED Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MED over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Medifast, Inc. (NYSE:MED), with a stake worth $162.7 million reported as of the end of September. Trailing Renaissance Technologies was Engaged Capital, which amassed a stake valued at $44 million. Miller Value Partners, Arrowstreet Capital, and Two Sigma Advisors 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 Engaged Capital allocated the biggest weight to Medifast, Inc. (NYSE:MED), around 4.55% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, designating 1.21 percent of its 13F equity portfolio to MED.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the most outsized position in Medifast, Inc. (NYSE:MED). Two Sigma Advisors had $17.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $2.8 million investment in the stock during the quarter. The other funds with brand new MED positions are Donald Sussman’s Paloma Partners, Michael Gelband’s ExodusPoint Capital, and Bruce Kovner’s Caxton Associates LP.
Let’s check out hedge fund activity in other stocks similar to Medifast, Inc. (NYSE:MED). We will take a look at Brinker International, Inc. (NYSE:EAT), Visteon Corp (NASDAQ:VC), Cardlytics, Inc. (NASDAQ:CDLX), FormFactor, Inc. (NASDAQ:FORM), Magellan Health Inc (NASDAQ:MGLN), Essential Properties Realty Trust, Inc. (NYSE:EPRT), and Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA). This group of stocks’ market values match MED’s market value.
|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 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $316 million in MED’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Medifast, Inc. (NYSE:MED) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MED is 58.6. 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 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on MED as the stock returned 17.9% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.