Did Hedge Funds Make The Right Call On AMN Healthcare Services Inc (AMN) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of AMN Healthcare Services Inc (NYSE:AMN) based on that data and determine whether they were really smart about the stock.

AMN Healthcare Services Inc (NYSE:AMN) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that AMN 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.

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let’s view the recent hedge fund action surrounding AMN Healthcare Services Inc (NYSE:AMN).

How are hedge funds trading AMN Healthcare Services Inc (NYSE:AMN)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 120% from the fourth quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in AMN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in AMN Healthcare Services Inc (NYSE:AMN) was held by Intrinsic Edge Capital, which reported holding $22 million worth of stock at the end of September. It was followed by Millennium Management with a $20.5 million position. Other investors bullish on the company included Royce & Associates, Balyasny Asset Management, and Prosight Capital. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to AMN Healthcare Services Inc (NYSE:AMN), around 2.92% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, earmarking 2.26 percent of its 13F equity portfolio to AMN.

Consequently, key hedge funds were breaking ground themselves. Intrinsic Edge Capital, managed by Mark Coe, established the most outsized position in AMN Healthcare Services Inc (NYSE:AMN). Intrinsic Edge Capital had $22 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also initiated a $4.8 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Renaissance Technologies, and Mike Vranos’s Ellington.

Let’s check out hedge fund activity in other stocks similar to AMN Healthcare Services Inc (NYSE:AMN). We will take a look at The Hain Celestial Group, Inc. (NASDAQ:HAIN), Appian Corporation (NASDAQ:APPN), Farfetch Limited (NYSE:FTCH), and Spirit Realty Capital Inc (NYSE:SRC). All of these stocks’ market caps are similar to AMN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $79 million in AMN’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. AMN Healthcare Services Inc (NYSE:AMN) 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. 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 beat the market by 15.5 percentage points. Unfortunately AMN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMN were disappointed as the stock returned -21.7% during the same time period 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 many of these stocks already outperformed the market so far this year.

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