Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is HCA Holdings Inc (NYSE:HCA) going to take off soon? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund positions were cut by 12 recently. HCA was in 71 hedge funds’ portfolios at the end of the third quarter of 2015. There were 83 hedge funds in our database with HCA positions at the end of the previous quarter. At the end of this article we will also compare HCA to other stocks including Enbridge Inc (USA) (NYSE:ENB), Canon Inc. (ADR) (NYSE:CAJ), and Precision Castparts Corp. (NYSE:PCP) to get a better sense of its popularity.
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Keeping this in mind, let’s take a look at the fresh action surrounding HCA Holdings Inc (NYSE:HCA).
What have hedge funds been doing with HCA Holdings Inc (NYSE:HCA)?
Heading into Q4, a total of 71 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the biggest position in HCA Holdings Inc (NYSE:HCA), worth close to $451.6 million, comprising 4.6% of its total 13F portfolio. The second largest stake is held by Glenview Capital, managed by Larry Robbins, which holds a $426.5 million position; 2.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions comprise John Paulson’s Paulson & Co, David Tepper’s Appaloosa Management LP and D. E. Shaw’s D E Shaw.
Seeing as HCA Holdings Inc (NYSE:HCA) has experienced bearish sentiment from hedge fund managers, we can see that there were a few funds that decided to sell off their full holdings last quarter. Interestingly, Stephen Mandel’s Lone Pine Capital dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $454.3 million in call options.. Brian Taylor’s fund, Pine River Capital Management, also dumped its call options., about $118.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 12 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as HCA Holdings Inc (NYSE:HCA) but similarly valued. We will take a look at Enbridge Inc (USA) (NYSE:ENB), Canon Inc. (ADR) (NYSE:CAJ), Precision Castparts Corp. (NYSE:PCP), and Tesla Motors Inc (NASDAQ:TSLA). This group of stocks’ market values match HCA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENB | 18 | 339619 | -2 |
| CAJ | 9 | 44714 | 2 |
| PCP | 67 | 6447163 | 15 |
| TSLA | 26 | 1011644 | 0 |
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1,961 million. That figure was $3,752 million in HCA’s case. Precision Castparts Corp. (NYSE:PCP) is the most popular stock in this table. On the other hand Canon Inc. (ADR) (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks HCA Holdings Inc (NYSE:HCA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio despite the number of funds long the stock dropping by 12.
