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Were Hedge Funds Right About Stryker Corporation (SYK)?

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 Stryker Corporation (NYSE:SYK) and determine whether the smart money was really smart about this stock.

Stryker Corporation (NYSE:SYK) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that SYK 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.

At the moment there are dozens of formulas investors put to use to evaluate stocks. A couple of the most underrated formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outpace the broader indices by a healthy margin (see the details here).

Rajiv Jain of GQG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Stryker Corporation (NYSE:SYK).

What have hedge funds been doing with Stryker Corporation (NYSE:SYK)?

Heading into the second quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SYK over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is SYK A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Stryker Corporation (NYSE:SYK). Fisher Asset Management has a $216.7 million position in the stock, comprising 0.3% of its 13F portfolio. On Fisher Asset Management’s heels is BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, which holds a $194 million position; 6.6% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management and Samuel Isaly’s OrbiMed Advisors. In terms of the portfolio weights assigned to each position BlueSpruce Investments allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 6.59% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, earmarking 6.29 percent of its 13F equity portfolio to SYK.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, initiated the most valuable position in Stryker Corporation (NYSE:SYK). BlueSpruce Investments had $194 million invested in the company at the end of the quarter. Samuel Isaly’s OrbiMed Advisors also initiated a $61.8 million position during the quarter. The other funds with brand new SYK positions are Ken Heebner’s Capital Growth Management, Stephen Yiu’s Blue Whale Capital, and Pasco Alfaro / Richard Tumure’s Miura Global Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Stryker Corporation (NYSE:SYK) but similarly valued. We will take a look at Becton, Dickinson and Company (NYSE:BDX), CME Group Inc (NASDAQ:CME), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Dominion Energy Inc. (NYSE:D). All of these stocks’ market caps are closest to SYK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BDX 56 1266617 6
CME 62 2265510 8
VRTX 56 3313662 3
D 34 371177 -3
Average 52 1804242 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $1804 million. That figure was $903 million in SYK’s case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Dominion Energy Inc. (NYSE:D) is the least popular one with only 34 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SYK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SYK investors were disappointed as the stock returned 8.6% during the second quarter 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.