Were Hedge Funds Right About SC Health Corporation (SCPE)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about SC Health Corporation (NYSE:SCPE).

Hedge fund interest in SC Health Corporation (NYSE:SCPE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SCPE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare SCPE to other stocks including Sanara MedTech Inc. (NASDAQ:SMTI), Ring Energy Inc (NYSE:REI), and Unity Bancorp, Inc. (NASDAQ:UNTY) to get a better sense of its popularity.

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a gander at the fresh hedge fund action regarding SC Health Corporation (NYSE:SCPE).

Do Hedge Funds Think SCPE Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in SCPE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Sander Gerber’s Hudson Bay Capital Management has the largest position in SC Health Corporation (NYSE:SCPE), worth close to $12.9 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Louis Bacon of Moore Global Investments, with a $6 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of Paul Glazer’s Glazer Capital, David Costen Haley’s HBK Investments and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Beryl Capital Management allocated the biggest weight to SC Health Corporation (NYSE:SCPE), around 0.44% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, setting aside 0.27 percent of its 13F equity portfolio to SCPE.

Because SC Health Corporation (NYSE:SCPE) has faced declining sentiment from the smart money, we can see that there lies a certain “tier” of funds that decided to sell off their full holdings in the first quarter. It’s worth mentioning that Joseph Edelman’s Perceptive Advisors said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $11 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $4.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to SC Health Corporation (NYSE:SCPE). These stocks are Sanara MedTech Inc. (NASDAQ:SMTI), Ring Energy Inc (NYSE:REI), Unity Bancorp, Inc. (NASDAQ:UNTY), Gaia, Inc. (NASDAQ:GAIA), RISE Education Cayman Ltd (NASDAQ:REDU), Milestone Scientific, Inc. (NYSE:MLSS), and vTv Therapeutics Inc (NASDAQ:VTVT). This group of stocks’ market values match SCPE’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $54 million in SCPE’s case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks SC Health Corporation (NYSE:SCPE) is more popular among hedge funds. Our overall hedge fund sentiment score for SCPE is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately SCPE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SCPE were disappointed as the stock returned 0.2% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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