Hedge Funds Are Piling Into ModivCare Inc. (MODV)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ModivCare Inc. (NASDAQ:MODV).

Is ModivCare Inc. (NASDAQ:MODV) an outstanding investment today? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions rose by 8 recently. ModivCare Inc. (NASDAQ:MODV) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MODV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Parag Vora of HG Vora Capital 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. Now we’re going to take a peek at the recent hedge fund action regarding ModivCare Inc. (NASDAQ:MODV).

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

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in MODV a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Coliseum Capital, managed by Christopher Shackelton and Adam Gray, holds the biggest position in ModivCare Inc. (NASDAQ:MODV). Coliseum Capital has a $262.3 million position in the stock, comprising 23.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $114.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions encompass Brian Ashford-Russell and Tim Woolley’s Polar Capital, Amy Minella’s Cardinal Capital and Parag Vora’s HG Vora Capital Management. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to ModivCare Inc. (NASDAQ:MODV), around 23.26% of its 13F portfolio. Ophir Asset Management is also relatively very bullish on the stock, setting aside 1.39 percent of its 13F equity portfolio to MODV.

Now, some big names have jumped into ModivCare Inc. (NASDAQ:MODV) headfirst. Cardinal Capital, managed by Amy Minella, established the biggest position in ModivCare Inc. (NASDAQ:MODV). Cardinal Capital had $39.1 million invested in the company at the end of the quarter. Parag Vora’s HG Vora Capital Management also initiated a $12.8 million position during the quarter. The following funds were also among the new MODV investors: Steven Ng and Andrew Mitchell’s Ophir Asset Management, Ray Dalio’s Bridgewater Associates, and Mika Toikka’s AlphaCrest Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ModivCare Inc. (NASDAQ:MODV) but similarly valued. We will take a look at EHang Holdings Limited (NASDAQ:EH), Ultra Clean Holdings Inc (NASDAQ:UCTT), Canoo Inc. (NASDAQ:GOEV), Healthcare Services Group, Inc. (NASDAQ:HCSG), Myriad Genetics, Inc. (NASDAQ:MYGN), Enviva Partners, LP (NYSE:EVA), and Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM). This group of stocks’ market values resemble MODV’s market value.

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As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $520 million in MODV’s case. Ultra Clean Holdings Inc (NASDAQ:UCTT) is the most popular stock in this table. On the other hand EHang Holdings Limited (NASDAQ:EH) is the least popular one with only 5 bullish hedge fund positions. ModivCare Inc. (NASDAQ:MODV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MODV is 82.5. 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 MODV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MODV were disappointed as the stock returned -2.3% 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.