Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Medifast, Inc. (NYSE:MED).
Medifast, Inc. (NYSE:MED) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. MED was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with MED holdings at the end of the previous quarter. Our calculations also showed that MED isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are plenty of methods stock traders employ to size up their stock investments. A pair of the most useful methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat their index-focused peers by a superb margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the new hedge fund action encompassing Medifast, Inc. (NYSE:MED).
What does smart money think about Medifast, Inc. (NYSE:MED)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MED over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Engaged Capital was the largest shareholder of Medifast, Inc. (NYSE:MED), with a stake worth $72.5 million reported as of the end of September. Trailing Engaged Capital was Renaissance Technologies, which amassed a stake valued at $55.9 million. Miller Value Partners, Nantahala Capital Management, and 13D 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 Engaged Capital allocated the biggest weight to Medifast, Inc. (NYSE:MED), around 9.51% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, setting aside 4.87 percent of its 13F equity portfolio to MED.
Since Medifast, Inc. (NYSE:MED) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their positions entirely by the end of the first quarter. Interestingly, Mark Coe’s Intrinsic Edge Capital cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $12.7 million in stock, and Harry Gail’s Harspring Capital Management was right behind this move, as the fund said goodbye to about $2.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks similar to Medifast, Inc. (NYSE:MED). These stocks are Pampa Energia S.A. (NYSE:PAM), Benchmark Electronics, Inc. (NYSE:BHE), Upwork Inc. (NASDAQ:UPWK), and German American Bancorp., Inc. (NASDAQ:GABC). This group of stocks’ market values are closest to 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 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $218 million in MED’s case. Upwork Inc. (NASDAQ:UPWK) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. Medifast, Inc. (NYSE:MED) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on MED as the stock returned 109.7% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.