Why These 4 Stocks Have Started the Week Off on the Right Foot

The markets have continued to tumble in the second week of 2016, with all major U.S stock indexes now down today after a mild rally earlier in the day. Despite the general decline in equities, a few stocks are bucking the 2016 trend and trading up today. Among them we can count Nevro Corp (NYSE:NVRO), Community Health Systems (NYSE:CYH), AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), and Tenet Healthcare Corp (NYSE:THC), and we’ll take a look into what’s driving the surges in these company’s stocks and what the hedge funds in our database think about these companies.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios (see the details here).

Let’s commence with Nevro Corp (NYSE:NVRO), a small-cap medical device company that hit a 52-week high on Monday, before settling around $69.20, up by almost 7%. The surge was triggered by the announcement of the company’s preliminary fourth quarter financial results. Management now expects revenue in the range of $32.6 million-to-$33.1 million, up from $9.7 million in the same quarter of last year, and ahead of the Street’s expectations.

Nevro Corp (NYSE:NVRO) seems to be gaining in popularity among the hedge funds in our database. As of the end of the third quarter of 2015, 21 of them held long stakes in the company, up by more than 10% quarter-over-quarter. A fund that seemed particularly bullish was Kevin Kotler’s Broadfin Capital, which almost quadrupled its holding over the third quarter, lifting it to more than 1.6 million shares worth roughly $74.5 million.

Next up is Community Health Systems (NYSE:CYH), which had gained nearly 10% today on high trading volume before giving back much of those gains later in the day. Although there was apparently no specific catalyst on Monday in terms of news, the small-cap hospital company announced last Friday that it was expecting to complete the spinoff of its Quorum Health Resources segment by June, rather than in the first quarter of 2016, as was originally projected.

Unlike Nevro Corp (NYSE:NVRO), Community Health Systems (NYSE:CYH) saw hedge fund interest decline over the latest reported quarter. Among the hedge funds that we track, 59 disclosed long positions in the company; while this figure is quite high, it is still lower than the 61 funds betting on the firm at the end of the second quarter of 2015. Interestingly, however, these 59 investment firms own more than 23% of Community Health Systems’ total shares, with Larry Robbins’ Glenview Capital holding over 10% (or about 12.09 million shares) of that total outstanding stock.

On the next page we will take a look at why AMAG Pharmaceuticals and Tenet Healthcare Corp are surging in afternoon trading.

Another Monday mover is AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), which was up by almost 3% after reporting preliminary fourth quarter sales figures in line with consensus estimates and issuing an upbeat guidance for fiscal year 2016. Shares have since slipped back but are still up slightly for the day.

“2015 was a transformational year filled with acquisition, integration and transition as we built a strong and diversified base of business with significant growth potential. Today we reported preliminary 2015 product revenues that were more than triple the revenues reported in 2014, and we anticipate achieving significant annual earnings in 2015 for the first time in the company’s history,” said William Heiden, AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG)’s Chief Executive Officer.

Same as in the prior quarter, AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) counted 29 hedge fund backers within our database at the end of the third quarter, with them holding about 28.4% of the company’s outstanding shares. William Leland Edwards’ Palo Alto Investors was the largest shareholder in our system, with more than 2.77 million shares of the company, worth over $110 million.

Finally, we come to Tenet Healthcare Corp (NYSE:THC), which is up by over 2% on no specific news. The small-cap healthcare services company has been going through some strategic initiatives, which analysts and investors expect to act as a catalyst for growth. In an article published Monday, analysts at Zacks noted that, “Recently, the company divested its North Carolina hospitals to Duke LifePoint Healthcare. Additionally, the company completed the joint venture with Baylor Scott & White Health. While the divestiture is expected to help the company focus on its core operations and thus boost its operating revenues, the partnership is a clear reflection of the company’s focus on increasing its scale of operation.”

In addition, Tenet Healthcare Corp (NYSE:THC) extended its partnership with Aetna Inc (NYSE:AET) last month. The four-year extension “is undoubtedly a significant move by Tenet Healthcare to reach its goal of associating itself with other insurance companies so as to bring superior quality, convenient and affordable choices to its members,” the Zacks analysts asserted.

Despite the aforementioned strategic review, hedge funds seem to be growing less confident in Tenet Healthcare Corp (NYSE:THC). Over the third quarter of 2015, the number of funds in our database with long stakes in the company fell by more than 8% to 44. These 44 firms, however, owned more than 32% of the company’s shares, with Larry Robbins’ Glenview Capital holding the largest stake of them all, totaling about 16.49 million shares worth approximately $608 million.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned in this article.