In this article we will analyze whether Surgery Partners, Inc. (NASDAQ:SGRY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is SGRY a good stock to buy now? Money managers were taking a pessimistic view. The number of long hedge fund bets were trimmed by 1 recently. Surgery Partners, Inc. (NASDAQ:SGRY) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 14. Our calculations also showed that SGRY 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). There were 14 hedge funds in our database with SGRY holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind we’re going to go over the recent hedge fund action regarding Surgery Partners, Inc. (NASDAQ:SGRY).
Do Hedge Funds Think SGRY Is A Good Stock To Buy Now?
At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SGRY over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Brian J. Higgins’s King Street Capital has the number one position in Surgery Partners, Inc. (NASDAQ:SGRY), worth close to $41.1 million, comprising 4.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $17.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Chuck Royce’s Royce & Associates, Kevin Molloy’s Iron Triangle Partners and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position King Street Capital allocated the biggest weight to Surgery Partners, Inc. (NASDAQ:SGRY), around 4.09% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, designating 3.67 percent of its 13F equity portfolio to SGRY.
Because Surgery Partners, Inc. (NASDAQ:SGRY) has experienced declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings last quarter. Interestingly, Mark T. Gallogly’s Centerbridge Partners dumped the largest investment of the 750 funds watched by Insider Monkey, valued at close to $10.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $4.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Surgery Partners, Inc. (NASDAQ:SGRY) but similarly valued. These stocks are Heartland Financial USA Inc (NASDAQ:HTLF), Allegheny Technologies Incorporated (NYSE:ATI), HudBay Minerals Inc (NYSE:HBM), Independence Realty Trust Inc (NYSE:IRT), Harsco Corporation (NYSE:HSC), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), and Griffon Corporation (NYSE:GFF). This group of stocks’ market valuations match SGRY’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $129 million in SGRY’s case. Griffon Corporation (NYSE:GFF) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 7 bullish hedge fund positions. Surgery Partners, Inc. (NASDAQ:SGRY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SGRY is 49.5. 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 and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SGRY as the stock returned 24.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.