How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Humana Inc (NYSE:HUM) and determine whether hedge funds had an edge regarding this stock.
Humana Inc (NYSE:HUM) has experienced an increase in support from the world’s most elite money managers lately. Humana Inc (NYSE:HUM) was in 60 hedge funds’ portfolios at the end of September. The all time high for this statistic is 75. Our calculations also showed that HUM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Kris Jenner of Rock Springs Capital 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. Now let’s view the fresh hedge fund action surrounding Humana Inc (NYSE:HUM).
Do Hedge Funds Think HUM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the second quarter of 2021. On the other hand, there were a total of 61 hedge funds with a bullish position in HUM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Viking Global held the most valuable stake in Humana Inc (NYSE:HUM), which was worth $1170.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $186.4 million worth of shares. Millennium Management, Rock Springs Capital Management, and OrbiMed Advisors 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 Iron Triangle Partners allocated the biggest weight to Humana Inc (NYSE:HUM), around 8.8% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, earmarking 5.53 percent of its 13F equity portfolio to HUM.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Columbus Hill Capital Management, managed by Kevin D. Eng, established the largest position in Humana Inc (NYSE:HUM). Columbus Hill Capital Management had $54.8 million invested in the company at the end of the quarter. Isaac Corre’s Governors Lane also made a $46.7 million investment in the stock during the quarter. The following funds were also among the new HUM investors: Isaac Corre’s Governors Lane, Mark Kingdon’s Kingdon Capital, and Richard Mashaal’s Rima Senvest Management.
Let’s check out hedge fund activity in other stocks similar to Humana Inc (NYSE:HUM). These stocks are Marvell Technology Group Ltd. (NASDAQ:MRVL), Dollar General Corp. (NYSE:DG), Banco Santander (Brasil) SA (NYSE:BSBR), Johnson Controls International plc (NYSE:JCI), Keurig Dr Pepper Inc. (NASDAQ:KDP), Coupang, Inc. (NYSE:CPNG), and Wipro Limited (NYSE:WIT). All of these stocks’ market caps match HUM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRVL | 45 | 1152936 | -6 |
| DG | 46 | 1905639 | 1 |
| BSBR | 8 | 10442 | 1 |
| JCI | 45 | 1031579 | 6 |
| KDP | 33 | 1269519 | 5 |
| CPNG | 45 | 10769505 | 12 |
| WIT | 15 | 183023 | 1 |
| Average | 33.9 | 2331806 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $2332 million. That figure was $2901 million in HUM’s case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Humana Inc (NYSE:HUM) is more popular among hedge funds. Our overall hedge fund sentiment score for HUM is 80. 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 managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on HUM as the stock returned 1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
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Disclosure: None. This article was originally published at Insider Monkey.
