Should You Avoid Magellan Health Inc (MGLN)?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Magellan Health Inc (NASDAQ:MGLN), and what that likely means for the prospects of the company and its stock.

Magellan Health Inc (NASDAQ:MGLN) has experienced a decrease in activity from the world’s largest hedge funds of late. MGLN was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with MGLN holdings at the end of the previous quarter. At the end of this article we will also compare MGLN to other stocks including Columbia Banking System Inc (NASDAQ:COLB), Kaiser Aluminum Corp. (NASDAQ:KALU), and Stag Industrial Inc (NYSE:STAG) to get a better sense of its popularity.

Follow Magellan Health Inc (NASDAQ:MGLN)

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Natallie Adams/

Natallie Adams/

With all of this in mind, we’re going to check out the key action encompassing Magellan Health Inc (NASDAQ:MGLN).

Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 10% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the largest position in Magellan Health Inc (NASDAQ:MGLN), worth close to $60.2 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $41.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Samuel Isaly’s OrbiMed Advisors, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital and D. E. Shaw’s D E Shaw.

Because Magellan Health Inc (NASDAQ:MGLN) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of money managers who sold off their full holdings heading into Q4. Intriguingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors said goodbye to the biggest stake of the 700 funds followed by Insider Monkey, totaling close to $2 million in stock, and George Hall’s Clinton Group was right behind this move, as the fund dropped about $0.3 million worth of MGLN shares. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Magellan Health Inc (NASDAQ:MGLN) but similarly valued. We will take a look at Columbia Banking System Inc (NASDAQ:COLB), Kaiser Aluminum Corp. (NASDAQ:KALU), Stag Industrial Inc (NYSE:STAG), and West Corp (NASDAQ:WSTC). This group of stocks’ market valuations are similar to MGLN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COLB 6 83231 -4
KALU 15 167607 2
STAG 6 60320 0
WSTC 15 42460 2

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $199 million in MGLN’s case. Kaiser Aluminum Corp. (NASDAQ:KALU) is the most popular stock in this table. On the other hand Columbia Banking System Inc (NASDAQ:COLB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Magellan Health Inc (NASDAQ:MGLN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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Disclosure: None