Skilled Healthcare Group, Inc. (SKH): Are Hedge Funds Right About This Stock?

Skilled Healthcare Group, Inc. (NYSE:SKH) was in 5 hedge funds’ portfolio at the end of the first quarter of 2013. SKH investors should pay attention to a decrease in enthusiasm from smart money of late. There were 5 hedge funds in our database with SKH positions at the end of the previous quarter.

To most shareholders, hedge funds are assumed to be unimportant, old financial tools of yesteryear. While there are more than 8000 funds trading at present, we choose to focus on the elite of this club, about 450 funds. Most estimates calculate that this group oversees the lion’s share of the smart money’s total capital, and by monitoring their highest performing investments, we have uncovered a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading sentiment is a second way to break down the financial markets. There are a variety of motivations for an upper level exec to downsize shares of his or her company, but only one, very clear reason why they would buy. Several academic studies have demonstrated the market-beating potential of this tactic if shareholders understand what to do (learn more here).

Now, we’re going to take a look at the key action regarding Skilled Healthcare Group, Inc. (NYSE:SKH).

Hedge fund activity in Skilled Healthcare Group, Inc. (NYSE:SKH)

Heading into Q2, a total of 5 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially.

Chuck Royce

Of the funds we track, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the largest position in Skilled Healthcare Group, Inc. (NYSE:SKH). PAR Capital Management has a $3.1 million position in the stock, comprising 0.1% of its 13F portfolio. On PAR Capital Management’s heels is Chuck Royce of Royce & Associates, with a $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include Cliff Asness’s AQR Capital Management, James Dondero’s Highland Capital Management and Ken Griffin’s Citadel Investment Group.

Because Skilled Healthcare Group, Inc. (NYSE:SKH) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that slashed their full holdings heading into Q2. At the top of the heap, Joel Greenblatt’s Gotham Asset Management dumped the largest investment of the “upper crust” of funds we key on, valued at an estimated $1 million in stock.. Mike Vranos’s fund, Ellington, also sold off its stock, about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in Skilled Healthcare Group, Inc. (NYSE:SKH)

Insider buying is at its handiest when the company in question has seen transactions within the past six months. Over the last half-year time frame, Skilled Healthcare Group, Inc. (NYSE:SKH) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Skilled Healthcare Group, Inc. (NYSE:SKH). These stocks are The Ensign Group, Inc. (NASDAQ:ENSG), National HealthCare Corporation (NYSEAMEX:NHC), Kindred Healthcare, Inc. (NYSE:KND), Five Star Quality Care, Inc. (NYSE:FVE), and Assisted Living Concepts, Inc. (NYSE:ALC). This group of stocks are the members of the long-term care facilities industry and their market caps are closest to SKH’s market cap.