Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Amedisys Inc (NASDAQ:AMED) .
Is Amedisys Inc (NASDAQ:AMED) undervalued? Prominent investors are taking a bearish view. The number of long hedge fund bets that are revealed through the 13F filings experienced a decline of 4 in recent months. At the end of this article we will also compare AMED to other stocks including Chemtura Corp (NYSE:CHMT), FTI Consulting, Inc. (NYSE:FCN), and Oasis Petroleum Inc. (NYSE:OAS) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading Amedisys Inc (NASDAQ:AMED)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 22% drop from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in AMED heading into this year, so nearly 1/3 of those have closed their positions this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Marshall and Ian Wace’s Marshall Wace LLP has the biggest position in Amedisys Inc (NASDAQ:AMED), worth close to $20.4 million. Sitting at the No. 2 spot is Renaissance Technologies, founded by Jim Simons, which holds a $17.5 million position. Some other members of the smart money that hold long positions consist of Brian Ashford-Russell and Tim Woolley’s Polar Capital, James Dondero’s Highland Capital Management, and David E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Amedisys Inc (NASDAQ:AMED) has faced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of hedgies that slashed their full holdings by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management sold off the biggest stake of all the investors monitored by Insider Monkey, totaling an estimated $4.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $1.1 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to Amedisys Inc (NASDAQ:AMED). These stocks are Chemtura Corp (NYSE:CHMT), FTI Consulting, Inc. (NYSE:FCN), Oasis Petroleum Inc. (NYSE:OAS), and Main Street Capital Corporation (NYSE:MAIN). This group of stocks’ market valuations match AMED’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $82 million in AMED’s case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 8 bullish hedge fund positions. Amedisys Inc (NASDAQ:AMED) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OAS might be a better candidate to consider taking a long position in.