Did Hedge Funds Make The Right Call On Henry Schein, Inc. (HSIC) ?

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 Henry Schein, Inc. (NASDAQ:HSIC) and determine whether the smart money was really smart about this stock.

Is Henry Schein, Inc. (NASDAQ:HSIC) a buy here? Prominent investors were in a bearish mood. The number of long hedge fund positions were cut by 1 recently. Our calculations also showed that HSIC 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). HSIC was in 35 hedge funds’ portfolios at the end of March. There were 36 hedge funds in our database with HSIC holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are plenty of formulas stock traders use to evaluate publicly traded companies. A pair of the most useful formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a solid amount (see the details here).

Bruce Kovner of Caxton Associates LP

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. Keeping this in mind we’re going to go over the recent hedge fund action regarding Henry Schein, Inc. (NASDAQ:HSIC).

How are hedge funds trading Henry Schein, Inc. (NASDAQ:HSIC)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in HSIC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Henry Schein, Inc. (NASDAQ:HSIC) was held by Generation Investment Management, which reported holding $668.7 million worth of stock at the end of September. It was followed by Select Equity Group with a $119.5 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and GAMCO Investors. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Henry Schein, Inc. (NASDAQ:HSIC), around 4.75% of its 13F portfolio. Cove Street Capital is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to HSIC.

Seeing as Henry Schein, Inc. (NASDAQ:HSIC) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few hedgies who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising about $3.4 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $3.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Henry Schein, Inc. (NASDAQ:HSIC) but similarly valued. We will take a look at Centrais Eletricas Brasileiras SA (NYSE:EBR), Avantor, Inc. (NYSE:AVTR), Ceridian HCM Holding Inc. (NYSE:CDAY), and Tenaris S.A. (NYSE:TS). All of these stocks’ market caps match HSIC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $1059 million in HSIC’s case. Avantor, Inc. (NYSE:AVTR) is the most popular stock in this table. On the other hand Centrais Eletricas Brasileiras SA (NYSE:EBR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Henry Schein, Inc. (NASDAQ:HSIC) is more popular among hedge funds. 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 still beat the market by 15.5 percentage points. Unfortunately HSIC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HSIC were disappointed as the stock returned 15.6% 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.

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