How do you pick the next stock to invest in? One way would be to spend hours 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 Health Net, Inc. (NYSE:HNT).
Is Health Net, Inc. (NYSE:HNT) going to take off soon? The best stock pickers are turning bullish. The number of bullish hedge fund bets moved up by 6 lately. HNT was in 43 hedge funds’ portfolios at the end of September. There were 37 hedge funds in our database with HNT holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Jacobs Engineering Group Inc (NYSE:JEC), Aluminum Corp. of China Limited (ADR) (NYSE:ACH), and CubeSmart (NYSE:CUBE) to gather more data points.
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In today’s marketplace there are numerous gauges shareholders use to evaluate publicly traded companies. A couple of the most underrated gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can trounce the market by a healthy amount (see the details here).
With all of this in mind, let’s view the latest action encompassing Health Net, Inc. (NYSE:HNT).
How have hedgies been trading Health Net, Inc. (NYSE:HNT)?
At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Samuel Isaly’s OrbiMed Advisors has the biggest position in Health Net, Inc. (NYSE:HNT), worth close to $204.6 million, accounting for 2.1% of its total 13F portfolio. The second largest stake is held by Nick Niell of Arrowgrass Capital Partners, with a $122.9 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of D. E. Shaw’s D E Shaw, John Orrico’s Water Island Capital and Robert Emil Zoellner’s Alpine Associates.
As one would reasonably expect, some big names have jumped into Health Net, Inc. (NYSE:HNT) headfirst. Arrowgrass Capital Partners, managed by Nick Niell, created the most valuable position in Health Net, Inc. (NYSE:HNT). Arrowgrass Capital Partners had $122.9 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $66.5 million investment in the stock during the quarter. The following funds were also among the new HNT investors: Robert Emil Zoellner’s Alpine Associates, Thomas Steyer’s Farallon Capital, and John Bader’s Halcyon Asset Management.
Let’s now review hedge fund activity in other stocks similar to Health Net, Inc. (NYSE:HNT). These stocks are Jacobs Engineering Group Inc (NYSE:JEC), Aluminum Corp. of China Limited (ADR) (NYSE:ACH), CubeSmart (NYSE:CUBE), and TransUnion (NYSE:TRU). This group of stocks’ market valuations match HNT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JEC | 26 | 179316 | 10 |
| ACH | 5 | 3478 | -1 |
| CUBE | 14 | 260978 | 3 |
| TRU | 19 | 222735 | -10 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $167 million, significantly below the $1.06 billion in HNT’s case. Jacobs Engineering Group Inc (NYSE:JEC) is the most popular stock in this table with a total of 26 funds reporting long positions. On the other hand Aluminum Corp. of China Limited (ADR) (NYSE:ACH) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Health Net, Inc. (NYSE:HNT) 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.
