Is NHC A Good Stock To Buy Now?

In this article we are going to use hedge fund sentiment as a tool and determine whether National HealthCare Corporation (NYSE:NHC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is NHC a good stock to buy now? National HealthCare Corporation (NYSE:NHC) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 13. NHC investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 11 hedge funds in our database with NHC positions at the end of the second quarter. Our calculations also showed that NHC 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 21st century investor’s toolkit there are numerous metrics market participants can use to assess publicly traded companies. A pair of the best metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top investment managers can outclass the market by a solid margin (see the details here).

David Harding

David Harding of Winton Capital Management

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 we’re going to take a gander at the latest hedge fund action surrounding National HealthCare Corporation (NYSE:NHC).

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

At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NHC over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NHC A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in National HealthCare Corporation (NYSE:NHC), which was worth $42.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $4.7 million worth of shares. Winton Capital Management, AQR Capital Management, and Marshall Wace LLP 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 Winton Capital Management allocated the biggest weight to National HealthCare Corporation (NYSE:NHC), around 0.08% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to NHC.

Judging by the fact that National HealthCare Corporation (NYSE:NHC) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that decided to sell off their positions entirely heading into Q4. It’s worth mentioning that Roger Ibbotson’s Zebra Capital Management dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $0.3 million in stock. Thomas Bailard’s fund, Bailard Inc, also said goodbye to its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to National HealthCare Corporation (NYSE:NHC). These stocks are Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), At Home Group Inc. (NYSE:HOME), Schweitzer-Mauduit International, Inc. (NYSE:SWM), Construction Partners, Inc. (NASDAQ:ROAD), Vocera Communications Inc (NYSE:VCRA), PetIQ, Inc. (NASDAQ:PETQ), and Retrophin Inc (NASDAQ:RTRX). This group of stocks’ market values match NHC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RYTM 10 227247 -1
HOME 34 370504 7
SWM 11 16466 2
ROAD 11 35881 1
VCRA 18 181990 3
PETQ 13 132362 -3
RTRX 24 370363 -2
Average 17.3 190688 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $56 million in NHC’s case. At Home Group Inc. (NYSE:HOME) is the most popular stock in this table. On the other hand Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks National HealthCare Corporation (NYSE:NHC) is even less popular than RYTM. Our overall hedge fund sentiment score for NHC is 27.1. 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 32.9% in 2020 through December 8th but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on NHC, though not to the same extent, as the stock returned 11.3% since the end of September (through December 8th) and outperformed the market as well.

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