Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Chemed Corporation (NYSE:CHE).
Chemed Corporation (NYSE:CHE) was in 23 hedge funds’ portfolios at the end of September. CHE investors should be aware of an increase in support from the world’s most elite money managers recently. There were 22 hedge funds in our database with CHE holdings at the end of the previous quarter. Our calculations also showed that CHE isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the fresh hedge fund action regarding Chemed Corporation (NYSE:CHE).
How have hedgies been trading Chemed Corporation (NYSE:CHE)?
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2018. By comparison, 15 hedge funds held shares or bullish call options in CHE heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Chemed Corporation (NYSE:CHE). Fisher Asset Management has a $151.9 million position in the stock, comprising 0.2% of its 13F portfolio. On Fisher Asset Management’s heels is Jim Simons of Renaissance Technologies, with a $74.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Mario Gabelli’s GAMCO Investors, Noam Gottesman’s GLG Partners and D. E. Shaw’s D E Shaw.
Consequently, some big names were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Chemed Corporation (NYSE:CHE). Two Sigma Advisors had $2.5 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with brand new CHE positions are Brandon Haley’s Holocene Advisors, Matthew Hulsizer’s PEAK6 Capital Management, and David Andre and Astro Teller’s Cerebellum Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Chemed Corporation (NYSE:CHE) but similarly valued. These stocks are Hudson Pacific Properties Inc (NYSE:HPP), Core Laboratories N.V. (NYSE:CLB), FibroGen Inc (NASDAQ:FGEN), and Lions Gate Entertainment Corporation (NYSE:LGF-B). All of these stocks’ market caps are similar to CHE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPP | 13 | 211981 | -2 |
| CLB | 14 | 247330 | -3 |
| FGEN | 17 | 467970 | 0 |
| LGF-B | 14 | 478134 | -1 |
| Average | 14.5 | 351354 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $465 million in CHE’s case. FibroGen Inc (NASDAQ:FGEN) is the most popular stock in this table. On the other hand Hudson Pacific Properties Inc (NYSE:HPP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Chemed Corporation (NYSE:CHE) 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.
Disclosure: None. This article was originally published at Insider Monkey.
