Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small-cap stocks, especially when they are screened well, can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Humana Inc (NYSE:HUM) from the perspective of these investors.
Humana Inc (NYSE:HUM) investors should pay attention to a decrease in enthusiasm from smart money in recent months. HUM was in 56 hedge funds’ portfolios at the end of the third quarter of 2015. There were 84 hedge funds in our database with HUM holdings at the end of the previous quarter. At the end of this article we will also compare HUM to other stocks including CSX Corporation (NYSE:CSX), Crown Castle International Corp. (NYSE:CCI), and Korea Electric Power Corporation (ADR) (NYSE:KEP) to get a better sense of its popularity.
Follow Humana Inc (NYSE:HUM)
Follow Humana Inc (NYSE:HUM)
In the eyes of most traders, hedge funds are seen as slow, outdated investment tools of yesteryear. While there are more than 8,000 funds trading at the moment, our experts choose to focus on the leaders of this group, approximately 700 funds. These hedge fund managers control the lion’s share of the smart money’s total asset base, and by tailing their matchless picks, Insider Monkey has revealed a few investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, let’s take a look at the recent action surrounding Humana Inc (NYSE:HUM).
How are hedge funds trading Humana Inc (NYSE:HUM)?
Heading into Q4, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 33% fall from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or had already accumulated large positions).
According to Insider Monkey’s hedge fund database, Larry Robbins’ Glenview Capital has the number one position in Humana Inc (NYSE:HUM), worth close to $1.19 billion, accounting for 5.9% of its total 13F portfolio. The second-most bullish fund is Viking Global, managed by Andreas Halvorsen, which holds a $689.8 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Matthew Halbower’s Pentwater Capital Management, D E Shaw, and Nick Niell’s Arrowgrass Capital Partners.
Since Humana Inc (NYSE:HUM) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their entire stakes last quarter. It’s worth mentioning that James Dinan’s York Capital Management sold off the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $262.5 million of call options underlying Humana shares. This is important to note, as aggregate hedge fund interest was cut by 28 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Humana Inc (NYSE:HUM) but similarly valued. These stocks are CSX Corporation (NYSE:CSX), Crown Castle International Corp. (NYSE:CCI), Korea Electric Power Corporation (ADR) (NYSE:KEP), and L Brands Inc (NYSE:LB). This group of stocks’ market values are similar to HUM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSX | 47 | 1390764 | -1 |
| CCI | 46 | 1865337 | -2 |
| KEP | 14 | 45168 | 2 |
| LB | 26 | 2211345 | -6 |
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.38 billion. That figure was $4.29 billion in HUM’s case. CSX Corporation (NYSE:CSX) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (ADR) (NYSE:KEP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Humana Inc (NYSE:HUM) 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, bearing in mind that ownership took a steep fall last quarter.
