In this article you are going to find out whether hedge funds think Option Care Health, Inc. (NASDAQ:OPCH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is OPCH a good stock to buy? Option Care Health, Inc. (NASDAQ:OPCH) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. Option Care Health, Inc. (NASDAQ:OPCH) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 31. There were 31 hedge funds in our database with OPCH positions at the end of the second quarter. Our calculations also showed that OPCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the recent hedge fund action regarding Option Care Health, Inc. (NASDAQ:OPCH).
Dan Loeb of Third Point
Do Hedge Funds Think OPCH Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OPCH over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Park West Asset Management was the largest shareholder of Option Care Health, Inc. (NASDAQ:OPCH), with a stake worth $146.6 million reported as of the end of September. Trailing Park West Asset Management was Polar Capital, which amassed a stake valued at $49.3 million. Castle Hook Partners, Duquesne Capital, and Millennium 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 Park West Asset Management allocated the biggest weight to Option Care Health, Inc. (NASDAQ:OPCH), around 3.57% of its 13F portfolio. Castle Hook Partners is also relatively very bullish on the stock, setting aside 1.25 percent of its 13F equity portfolio to OPCH.
Due to the fact that Option Care Health, Inc. (NASDAQ:OPCH) has experienced bearish sentiment from the smart money, logic holds that there was a specific group of funds who were dropping their entire stakes heading into Q4. Intriguingly, Doug Silverman and Alexander Klabin’s Senator Investment Group sold off the largest investment of all the hedgies tracked by Insider Monkey, worth about $32.8 million in stock, and Christian Leone’s Luxor Capital Group was right behind this move, as the fund said goodbye to about $7.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Option Care Health, Inc. (NASDAQ:OPCH). We will take a look at Tegna Inc (NYSE:TGNA), Coursera, Inc. (NYSE:COUR), American Eagle Outfitters Inc. (NYSE:AEO), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), Fisker Inc. (NYSE:FSR), Qualys Inc (NASDAQ:QLYS), and Healthcare Realty Trust Inc (NYSE:HR). This group of stocks’ market valuations resemble OPCH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGNA | 37 | 420370 | 19 |
| COUR | 25 | 173727 | 14 |
| AEO | 24 | 1208509 | -17 |
| OCDX | 30 | 272834 | 9 |
| FSR | 15 | 228103 | -1 |
| QLYS | 18 | 220919 | -2 |
| HR | 18 | 210905 | -1 |
| Average | 23.9 | 390767 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $391 million. That figure was $362 million in OPCH’s case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand Fisker Inc. (NYSE:FSR) is the least popular one with only 15 bullish hedge fund positions. Option Care Health, Inc. (NASDAQ:OPCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OPCH is 67.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately OPCH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OPCH were disappointed as the stock returned 4.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Option Care Health Inc. (NASDAQ:OPCH)
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Disclosure: None. This article was originally published at Insider Monkey.
