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Were Hedge Funds Right About Souring On Amedisys Inc (AMED)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtAmedisys Inc (NASDAQ:AMED) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Amedisys Inc (NASDAQ:AMED) has experienced a decrease in activity from the world’s largest hedge funds lately. AMED was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. There were 22 hedge funds in our database with AMED holdings at the end of the previous quarter. Our calculations also showed that AMED isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a look at the recent hedge fund action regarding Amedisys Inc (NASDAQ:AMED).

How are hedge funds trading Amedisys Inc (NASDAQ:AMED)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in AMED a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is AMED A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in Amedisys Inc (NASDAQ:AMED). D E Shaw has a $82.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Jeremy Green of Redmile Group, with a $32.6 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass  Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Amedisys Inc (NASDAQ:AMED), around 1.43% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to AMED.

Due to the fact that Amedisys Inc (NASDAQ:AMED) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who were dropping their full holdings last quarter. At the top of the heap, Bhagwan Jay Rao’s Integral Health Asset Management dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $10.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $5.5 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Amedisys Inc (NASDAQ:AMED). We will take a look at The Stars Group Inc. (NASDAQ:TSG), TIM Participacoes SA (NYSE:TSU), CF Industries Holdings, Inc. (NYSE:CF), and Reliance Steel & Aluminum Co. (NYSE:RS). This group of stocks’ market valuations are similar to AMED’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSG 34 1097115 -11
TSU 11 154487 0
CF 34 606091 -7
RS 23 211117 -11
Average 25.5 517203 -7.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $517 million. That figure was $244 million in AMED’s case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 11 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately AMED wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AMED investors were disappointed as the stock returned 20.2% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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