Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Cerner Corporation (NASDAQ:CERN) investors should pay attention to an increase in hedge fund interest lately. CERN was in 25 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with CERN positions at the end of the previous quarter. Our calculations also showed that cern isn’t among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action surrounding Cerner Corporation (NASDAQ:CERN).
How have hedgies been trading Cerner Corporation (NASDAQ:CERN)?
Heading into the fourth quarter of 2018, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CERN over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Generation Investment Management held the most valuable stake in Cerner Corporation (NASDAQ:CERN), which was worth $503.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $69.6 million worth of shares. Moreover, Two Sigma Advisors, Renaissance Technologies, and Healthcor Management LP were also bullish on Cerner Corporation (NASDAQ:CERN), allocating a large percentage of their portfolios to this stock.
Now, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the largest position in Cerner Corporation (NASDAQ:CERN). Point72 Asset Management had $16.2 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s check out hedge fund activity in other stocks similar to Cerner Corporation (NASDAQ:CERN). These stocks are Cintas Corporation (NASDAQ:CTAS), Palo Alto Networks Inc (NYSE:PANW), Motorola Solutions Inc (NYSE:MSI), and POSCO (NYSE:PKX). This group of stocks’ market valuations match CERN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTAS | 31 | 784446 | -3 |
| PANW | 46 | 2889148 | 4 |
| MSI | 26 | 839297 | 6 |
| PKX | 14 | 157776 | 0 |
| Average | 29.25 | 1167667 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.17 billion. That figure was $890 million in CERN’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 14 bullish hedge fund positions. Cerner Corporation (NASDAQ:CERN) 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. In this regard PANW might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
