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Were Hedge Funds Right About Flocking Into Tenet Healthcare Corp (THC) ?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Tenet Healthcare Corp (NYSE:THC) has experienced an increase in hedge fund sentiment lately. Our calculations also showed that THC isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GLENVIEW CAPITAL

We’re going to analyze the latest hedge fund action regarding Tenet Healthcare Corp (NYSE:THC).

How are hedge funds trading Tenet Healthcare Corp (NYSE:THC)?

At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in THC a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

THC_apr2019

More specifically, Glenview Capital was the largest shareholder of Tenet Healthcare Corp (NYSE:THC), with a stake worth $306.7 million reported as of the end of December. Trailing Glenview Capital was Camber Capital Management, which amassed a stake valued at $55.7 million. Nantahala Capital Management, AQR Capital Management, and Redwood Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, some big names were leading the bulls’ herd. OrbiMed Advisors, managed by Samuel Isaly, assembled the biggest position in Tenet Healthcare Corp (NYSE:THC). OrbiMed Advisors had $9.6 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey’s Healthcor Management LP also initiated a $5.3 million position during the quarter. The following funds were also among the new THC investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Jim Simons’s Renaissance Technologies, and Mike Vranos’s Ellington.

Let’s check out hedge fund activity in other stocks similar to Tenet Healthcare Corp (NYSE:THC). We will take a look at Northwest Bancshares, Inc. (NASDAQ:NWBI), MINDBODY Inc (NASDAQ:MB), Northwest Natural Holding Company (NYSE:NWN), and Visteon Corp (NASDAQ:VC). All of these stocks’ market caps match THC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWBI 9 64097 0
MB 16 373023 -3
NWN 10 64831 1
VC 20 249029 -2
Average 13.75 187745 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $570 million in THC’s case. Visteon Corp (NASDAQ:VC) is the most popular stock in this table. On the other hand Northwest Bancshares, Inc. (NASDAQ:NWBI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Tenet Healthcare Corp (NYSE:THC) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on THC as the stock returned 35.2% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.

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