Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Cardinal Health, Inc. (NYSE:CAH) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Cardinal Health, Inc. (NYSE:CAH) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. Cardinal Health, Inc. (NYSE:CAH) was in 36 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 49. There were 40 hedge funds in our database with CAH holdings at the end of June. Our calculations also showed that CAH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Mason Hawkins of Southeastern Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s analyze the key hedge fund action surrounding Cardinal Health, Inc. (NYSE:CAH).
Do Hedge Funds Think CAH Is A Good Stock To Buy Now?
At third quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAH over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of Cardinal Health, Inc. (NYSE:CAH), with a stake worth $146.2 million reported as of the end of September. Trailing Pzena Investment Management was D E Shaw, which amassed a stake valued at $126.1 million. Millennium Management, Arrowstreet Capital, and Ariel Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HealthInvest Partners AB allocated the biggest weight to Cardinal Health, Inc. (NYSE:CAH), around 2.37% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 2.23 percent of its 13F equity portfolio to CAH.
Due to the fact that Cardinal Health, Inc. (NYSE:CAH) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Stephen DuBois’s Camber Capital Management dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $71.4 million in call options. Michael Burry’s fund, Scion Asset Management, also sold off its call options, about $49 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cardinal Health, Inc. (NYSE:CAH) but similarly valued. These stocks are Clarivate Plc (NYSE:CLVT), Alliant Energy Corporation (NYSE:LNT), Zendesk Inc (NYSE:ZEN), News Corp (NASDAQ:NWSA), Loews Corporation (NYSE:L), Solaredge Technologies Inc (NASDAQ:SEDG), and Nordson Corporation (NASDAQ:NDSN). This group of stocks’ market caps are closest to CAH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLVT | 32 | 4723546 | -9 |
| LNT | 17 | 76693 | 1 |
| ZEN | 53 | 1557704 | 1 |
| NWSA | 34 | 737689 | -3 |
| L | 27 | 175121 | -1 |
| SEDG | 33 | 594467 | -4 |
| NDSN | 29 | 310857 | -5 |
| Average | 32.1 | 1168011 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $1168 million. That figure was $665 million in CAH’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NYSE:LNT) is the least popular one with only 17 bullish hedge fund positions. Cardinal Health, Inc. (NYSE:CAH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAH is 49.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on CAH as the stock returned 5.3% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
