Hedge Funds Are Piling Into Health Catalyst, Inc (HCAT)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Health Catalyst, Inc (NASDAQ:HCAT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Health Catalyst, Inc (NASDAQ:HCAT) a buy here? Investors who are in the know were in a bullish mood. The number of long hedge fund bets improved by 4 recently. Health Catalyst, Inc (NASDAQ:HCAT) was in 26 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HCAT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to check out the latest hedge fund action surrounding Health Catalyst, Inc (NASDAQ:HCAT).

Joseph Edelman of Perceptive Advisors

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

At third quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the second quarter of 2021. By comparison, 14 hedge funds held shares or bullish call options in HCAT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Rock Springs Capital Management was the largest shareholder of Health Catalyst, Inc (NASDAQ:HCAT), with a stake worth $42.5 million reported as of the end of September. Trailing Rock Springs Capital Management was Perceptive Advisors, which amassed a stake valued at $29.5 million. Sectoral Asset Management, Impax Asset Management, and Rhenman & Partners Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to Health Catalyst, Inc (NASDAQ:HCAT), around 1.83% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 0.89 percent of its 13F equity portfolio to HCAT.

Now, specific money managers have been driving this bullishness. Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, initiated the largest position in Health Catalyst, Inc (NASDAQ:HCAT). Sectoral Asset Management had $22.1 million invested in the company at the end of the quarter. Brian Bares’s Bares Capital Management also made a $7 million investment in the stock during the quarter. The other funds with brand new HCAT positions are Josh Donfeld and David Rogers’s Castle Hook Partners, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now review hedge fund activity in other stocks similar to Health Catalyst, Inc (NASDAQ:HCAT). These stocks are ModivCare Inc. (NASDAQ:MODV), Stepan Company (NYSE:SCL), Plexus Corp. (NASDAQ:PLXS), SmartRent, Inc. (NYSE:SMRT), Renewable Energy Group Inc (NASDAQ:REGI), Primo Water Corporation (NYSE:PRMW), and Myriad Genetics, Inc. (NASDAQ:MYGN). This group of stocks’ market valuations are closest to HCAT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $192 million in HCAT’s case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 9 bullish hedge fund positions. Health Catalyst, Inc (NASDAQ:HCAT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HCAT is 77.6. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately HCAT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on HCAT were disappointed as the stock returned -24.2% since the end of September (through 12/9) 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.