Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of WellCare Health Plans, Inc. (NYSE:WCG).
WellCare Health Plans, Inc. (NYSE:WCG) investors should pay attention to an increase in hedge fund sentiment of late. WCG was in 32 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with WCG holdings at the end of the previous quarter. At the end of this article we will also compare WCG to other stocks including Strategic Hotels and Resorts Inc (NYSE:BEE), Teradyne, Inc. (NYSE:TER), and Syntel, Inc. (NASDAQ:SYNT) to get a better sense of its popularity.
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With all of this in mind, let’s analyze the latest action encompassing WellCare Health Plans, Inc. (NYSE:WCG).
Hedge fund activity in WellCare Health Plans, Inc. (NYSE:WCG)
Heading into Q4, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Alan Fournier’s Pennant Capital Management has the number one position in WellCare Health Plans, Inc. (NYSE:WCG), worth close to $235.4 million, comprising 5% of its total 13F portfolio. On Pennant Capital Management’s heels is Columbus Circle Investors, with a $95.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Jeremy Green’s Redmile Group, Roberto Mignone’s Bridger Management and Mariko Gordon’s Daruma Asset Management.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Redmile Group, managed by Jeremy Green, assembled the largest position in WellCare Health Plans, Inc. (NYSE:WCG). Redmile Group had $81.6 million invested in the company at the end of the quarter. Paul Sinclair’s Blue Jay Capital Management also made a $12.9 million investment in the stock during the quarter. The following funds were also among the new WCG investors: Samuel Isaly’s OrbiMed Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Brad Farber’s Atika Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WellCare Health Plans, Inc. (NYSE:WCG) but similarly valued. We will take a look at Strategic Hotels and Resorts Inc (NYSE:BEE), Teradyne, Inc. (NYSE:TER), Syntel, Inc. (NASDAQ:SYNT), and Bank Of The Ozarks Inc (NASDAQ:OZRK). All of these stocks’ market caps match WCG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEE | 31 | 466880 | 16 |
| TER | 25 | 538733 | -5 |
| SYNT | 17 | 66004 | 7 |
| OZRK | 13 | 129323 | -2 |
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $300 million. That figure was $725 million in WCG’s case. Strategic Hotels and Resorts Inc (NYSE:BEE) is the most popular stock in this table. On the other hand Bank Of The Ozarks Inc (NASDAQ:OZRK) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks WellCare Health Plans, Inc. (NYSE:WCG) 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.
