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Were Hedge Funds Right About Souring On Molina Healthcare, Inc. (MOH)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. 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 we look at how hedge funds traded Molina Healthcare, Inc. (NYSE:MOH) and determine whether the smart money was really smart about this stock.

Is Molina Healthcare, Inc. (NYSE:MOH) ready to rally soon? The best stock pickers were turning less bullish. The number of long hedge fund bets went down by 3 lately. Our calculations also showed that MOH 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

With all of this in mind let’s take a look at the latest hedge fund action encompassing Molina Healthcare, Inc. (NYSE:MOH).

What have hedge funds been doing with Molina Healthcare, Inc. (NYSE:MOH)?

At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MOH over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Molina Healthcare, Inc. (NYSE:MOH) was held by Renaissance Technologies, which reported holding $579.5 million worth of stock at the end of September. It was followed by Viking Global with a $190.7 million position. Other investors bullish on the company included Iridian Asset Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Tavio Capital allocated the biggest weight to Molina Healthcare, Inc. (NYSE:MOH), around 29.61% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 5.03 percent of its 13F equity portfolio to MOH.

Judging by the fact that Molina Healthcare, Inc. (NYSE:MOH) has witnessed declining sentiment from the smart money, it’s safe to say that there were a few hedgies that elected to cut their entire stakes by the end of the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management cut the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $13.9 million in stock, and Frank Brosens’s Taconic Capital was right behind this move, as the fund sold off about $4.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Molina Healthcare, Inc. (NYSE:MOH) but similarly valued. We will take a look at Avery Dennison Corporation (NYSE:AVY), Huazhu Group Limited (NASDAQ:HTHT), Molson Coors Beverage Company (NYSE:TAP), and Concho Resources Inc. (NYSE:CXO). All of these stocks’ market caps are similar to MOH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVY 18 82899 -4
HTHT 17 255677 -1
TAP 34 258923 3
CXO 31 492191 -8
Average 25 272423 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $1223 million in MOH’s case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 17 bullish hedge fund positions. Molina Healthcare, Inc. (NYSE:MOH) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on MOH as the stock returned 27.4% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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