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. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Universal Health Services, Inc. (NYSE:UHS) shareholders have witnessed an increase in enthusiasm from smart money of late. Our calculations also showed that UHS 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 check out the key hedge fund action encompassing Universal Health Services, Inc. (NYSE:UHS).
How are hedge funds trading Universal Health Services, Inc. (NYSE:UHS)?
Heading into the fourth quarter of 2018, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UHS over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Universal Health Services, Inc. (NYSE:UHS) was held by Glenview Capital, which reported holding $356.9 million worth of stock at the end of September. It was followed by Maverick Capital with a $308.1 million position. Other investors bullish on the company included Camber Capital Management, Nokota Management, and Sirios Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Nokota Management, managed by Matthew Knauer and Mina Faltas, created the most valuable call position in Universal Health Services, Inc. (NYSE:UHS). Nokota Management had $92 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also initiated a $22.8 million position during the quarter. The other funds with new positions in the stock are Krishen Sud’s Sivik Global Healthcare, Dmitry Balyasny’s Balyasny Asset Management, and Amy Mulderry’s Tavio Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Universal Health Services, Inc. (NYSE:UHS) but similarly valued. We will take a look at Andeavor Logistics LP (NYSE:ANDX), Vedanta Ltd (NYSE:VEDL), FMC Corporation (NYSE:FMC), and Viacom, Inc. (NASDAQ:VIAB). This group of stocks’ market caps are closest to UHS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANDX | 6 | 11720 | 0 |
| VEDL | 5 | 52265 | -4 |
| FMC | 37 | 1881821 | 0 |
| VIAB | 33 | 733769 | 6 |
| Average | 20.25 | 669894 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $1.17 billion in UHS’s case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 5 bullish hedge fund positions. Universal Health Services, Inc. (NYSE:UHS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FMC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
