What Do Hedge Funds Think of Select Medical Holdings Corporation (SEM)?

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Select Medical Holdings Corporation (NYSE:SEM).

Select Medical Holdings Corporation (NYSE:SEM) has seen an increase in support from the world’s most elite money managers in recent months. SEM was in 23 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with SEM positions at the end of the previous quarter. At the end of this article we will also compare SEM to other stocks including Prothena Corporation PLC (NASDAQ:PRTA), Third Point Reinsurance Ltd (NYSE:TPRE), and Avon Products, Inc. (NYSE:AVP) to get a better sense of its popularity.

In today’s marketplace there are a lot of signals shareholders employ to analyze their holdings. A couple of the most innovative signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the S&P 500 by a healthy amount (see the details here).

Now, we’re going to take a gander at the new action encompassing Select Medical Holdings Corporation (NYSE:SEM).

How have hedgies been trading Select Medical Holdings Corporation (NYSE:SEM)?

Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, North Tide Capital, managed by Conan Laughlin, holds the most valuable position in Select Medical Holdings Corporation (NYSE:SEM). North Tide Capital has a $141.3 million position in the stock, comprising 12.3% of its 13F portfolio. The second largest stake is held by Camber Capital Management, managed by Stephen DuBois, which holds a $46.9 million position; the fund has 4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Ken Fisher’s Fisher Asset Management, Eric Chen’s Antipodean Advisors and Israel Englander’s Millennium Management.

As industrywide interest jumped, specific money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, established the biggest position in Select Medical Holdings Corporation (NYSE:SEM). Renaissance Technologies had $1.7 million invested in the company at the end of the quarter. James E. Flynn’s Deerfield Management also made a $0.6 million investment in the stock during the quarter. The other funds with brand new SEM positions are Ken Gray and Steve Walsh’s Bryn Mawr Capital, Dmitry Balyasny’s Balyasny Asset Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Select Medical Holdings Corporation (NYSE:SEM) but similarly valued. We will take a look at Prothena Corporation PLC (NASDAQ:PRTA), Third Point Reinsurance Ltd (NYSE:TPRE), Avon Products, Inc. (NYSE:AVP), and Flow International Corporation (NASDAQ:FLOW). All of these stocks’ market caps are similar to SEM’s market cap.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $337 million in SEM’s case. Avon Products, Inc. (NYSE:AVP) is the most popular stock in this table. On the other hand Third Point Reinsurance Ltd (NYSE:TPRE) is the least popular one with only 14 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AVP might be a better candidate to consider a long position.