The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Surgery Partners, Inc. (NASDAQ:SGRY) and determine whether the smart money was really smart about this stock.
Is Surgery Partners, Inc. (NASDAQ:SGRY) a bargain? The best stock pickers were in a bearish mood. The number of bullish hedge fund positions were trimmed by 1 recently. Our calculations also showed that SGRY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are viewed as slow, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the crème de la crème of this club, about 850 funds. These investment experts oversee the lion’s share of the smart money’s total asset base, and by paying attention to their inimitable stock picks, Insider Monkey has unearthed various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Surgery Partners, Inc. (NASDAQ:SGRY).
Hedge fund activity in Surgery Partners, Inc. (NASDAQ:SGRY)
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SGRY over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, King Street Capital was the largest shareholder of Surgery Partners, Inc. (NASDAQ:SGRY), with a stake worth $12.5 million reported as of the end of September. Trailing King Street Capital was Royce & Associates, which amassed a stake valued at $7.2 million. Centerbridge Partners, Citadel Investment Group, and Renaissance Technologies 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 Centerbridge Partners allocated the biggest weight to Surgery Partners, Inc. (NASDAQ:SGRY), around 1.64% of its 13F portfolio. King Street Capital is also relatively very bullish on the stock, dishing out 1.39 percent of its 13F equity portfolio to SGRY.
Seeing as Surgery Partners, Inc. (NASDAQ:SGRY) has experienced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few funds that decided to sell off their entire stakes heading into Q4. Interestingly, Israel Englander’s Millennium Management sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $7.1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $2.9 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Surgery Partners, Inc. (NASDAQ:SGRY) but similarly valued. These stocks are Dorchester Minerals LP (NASDAQ:DMLP), HCI Group Inc (NYSE:HCI), Lizhi Inc. (NASDAQ:LIZI), and Computer Programs & Systems, Inc. (NASDAQ:CPSI). This group of stocks’ market caps match SGRY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DMLP | 6 | 15276 | 1 |
| HCI | 10 | 21739 | 0 |
| LIZI | 1 | 355 | 1 |
| CPSI | 12 | 19417 | -1 |
| Average | 7.25 | 14197 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $30 million in SGRY’s case. Computer Programs & Systems, Inc. (NASDAQ:CPSI) is the most popular stock in this table. On the other hand Lizhi Inc. (NASDAQ:LIZI) is the least popular one with only 1 bullish hedge fund positions. Surgery Partners, Inc. (NASDAQ:SGRY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on SGRY as the stock returned 77.2% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
