In this article we will check out the progression of hedge fund sentiment towards Healthequity Inc (NASDAQ:HQY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Healthequity Inc (NASDAQ:HQY) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. HQY investors should pay attention to an increase in hedge fund interest recently. There were 18 hedge funds in our database with HQY holdings at the end of March. Our calculations also showed that HQY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Castor of Sio Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s analyze the recent hedge fund action regarding Healthequity Inc (NASDAQ:HQY).
Do Hedge Funds Think HQY Is A Good Stock To Buy Now?
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HQY over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Healthequity Inc (NASDAQ:HQY) was held by Echo Street Capital Management, which reported holding $165.9 million worth of stock at the end of June. It was followed by Greenhouse Funds with a $26.9 million position. Other investors bullish on the company included Point72 Asset Management, Eversept Partners, and Motley Fool Asset Management. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Healthequity Inc (NASDAQ:HQY), around 2.36% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 2.03 percent of its 13F equity portfolio to HQY.
Consequently, specific money managers have jumped into Healthequity Inc (NASDAQ:HQY) headfirst. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Healthequity Inc (NASDAQ:HQY). Point72 Asset Management had $17.5 million invested in the company at the end of the quarter. Kamran Moghtaderi’s Eversept Partners also made a $15.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Grossman and Glen Schneider’s SG Capital Management, Michael Castor’s Sio Capital, and Mark Coe’s Intrinsic Edge Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Healthequity Inc (NASDAQ:HQY) but similarly valued. These stocks are Texas Roadhouse Inc (NASDAQ:TXRH), AerCap Holdings N.V. (NYSE:AER), Janus Henderson Group plc (NYSE:JHG), Acuity Brands, Inc. (NYSE:AYI), Prosperity Bancshares, Inc. (NYSE:PB), ShockWave Medical, Inc. (NASDAQ:SWAV), and Tetra Tech, Inc. (NASDAQ:TTEK). This group of stocks’ market caps are similar to HQY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TXRH | 37 | 806751 | 15 |
| AER | 45 | 1425101 | 2 |
| JHG | 22 | 1203630 | -6 |
| AYI | 33 | 794108 | 2 |
| PB | 16 | 98631 | -5 |
| SWAV | 27 | 236200 | 10 |
| TTEK | 25 | 134924 | 2 |
| Average | 29.3 | 671335 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $671 million. That figure was $286 million in HQY’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Prosperity Bancshares, Inc. (NYSE:PB) is the least popular one with only 16 bullish hedge fund positions. Healthequity Inc (NASDAQ:HQY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HQY is 38.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately HQY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HQY investors were disappointed as the stock returned -16% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Healthequity Inc. (NASDAQ:HQY)
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Disclosure: None. This article was originally published at Insider Monkey.
