Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Stryker Corporation (NYSE:SYK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Stryker Corporation (NYSE:SYK) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that SYK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to take a look at the new hedge fund action surrounding Stryker Corporation (NYSE:SYK).
Hedge fund activity in Stryker Corporation (NYSE:SYK)
At the end of the fourth quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SYK over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Rajiv Jain’s GQG Partners has the largest position in Stryker Corporation (NYSE:SYK), worth close to $164.7 million, accounting for 1.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $91 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Steve Cohen’s Point72 Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position GuardCap Asset Management allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 3.06% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, designating 1.95 percent of its 13F equity portfolio to SYK.
As industrywide interest jumped, some big names have jumped into Stryker Corporation (NYSE:SYK) headfirst. Renaissance Technologies, created the largest position in Stryker Corporation (NYSE:SYK). Renaissance Technologies had $91 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $69.9 million position during the quarter. The other funds with brand new SYK positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Israel Englander’s Millennium Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Stryker Corporation (NYSE:SYK). We will take a look at BlackRock, Inc. (NYSE:BLK), Anthem Inc (NYSE:ANTM), Cigna Corporation (NYSE:CI), and Truist Financial Corporation (NYSE:TFC). This group of stocks’ market valuations are similar to SYK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLK | 43 | 916922 | -4 |
| ANTM | 71 | 4833772 | 7 |
| CI | 72 | 4118635 | 7 |
| TFC | 35 | 875715 | 4 |
| Average | 55.25 | 2686261 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.25 hedge funds with bullish positions and the average amount invested in these stocks was $2686 million. That figure was $833 million in SYK’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Truist Financial Corporation (NYSE:TFC) is the least popular one with only 35 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately SYK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYK investors were disappointed as the stock returned -16.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
