Hedge Funds Are Crazy About Select Medical Holdings Corporation (SEM)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Select Medical Holdings Corporation (NYSE:SEM) to find out whether there were any major changes in hedge funds’ views.

Is Select Medical Holdings Corporation (NYSE:SEM) the right pick for your portfolio? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets went up by 2 in recent months. Select Medical Holdings Corporation (NYSE:SEM) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistic is 26. Our calculations also showed that SEM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At the moment there are numerous signals stock market investors can use to value their stock investments. A duo of the most under-the-radar signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the S&P 500 by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Ken Heebner of Capital Growth Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the fresh hedge fund action encompassing Select Medical Holdings Corporation (NYSE:SEM).

Do Hedge Funds Think SEM Is A Good Stock To Buy Now?

At second quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the first quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in SEM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in Select Medical Holdings Corporation (NYSE:SEM), worth close to $56 million, amounting to 0.1% of its total 13F portfolio. Coming in second is OrbiMed Advisors, which holds a $53.7 million position; 0.5% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish encompass Ken Heebner’s Capital Growth Management, Steve Cohen’s Point72 Asset Management and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Select Medical Holdings Corporation (NYSE:SEM), around 3.26% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 0.91 percent of its 13F equity portfolio to SEM.

As one would reasonably expect, some big names have been driving this bullishness. OrbiMed Advisors, assembled the largest position in Select Medical Holdings Corporation (NYSE:SEM). OrbiMed Advisors had $53.7 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $36.1 million investment in the stock during the quarter. The following funds were also among the new SEM investors: Krishen Sud’s Sivik Global Healthcare, Ronald Hua’s Qtron Investments, and Ian Simm’s Impax Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Select Medical Holdings Corporation (NYSE:SEM) but similarly valued. These stocks are Herbalife Nutrition Ltd. (NYSE:HLF), TFS Financial Corporation (NASDAQ:TFSL), Fisker Inc. (NYSE:FSR), PLDT Inc. (NYSE:PHI), Celsius Holdings, Inc. (NASDAQ:CELH), Acadia Healthcare Company Inc (NASDAQ:ACHC), and Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). This group of stocks’ market caps are similar to SEM’s market cap.

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As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $251 million in SEM’s case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SEM is 61.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately SEM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SEM were disappointed as the stock returned -20% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.