Hedge Funds Aren’t Crazy About Select Medical Holdings Corporation (SEM) Anymore

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Select Medical Holdings Corporation (NYSE:SEM) has seen a decrease in hedge fund sentiment in recent months. SEM was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with SEM positions at the end of the previous quarter. At the end of this article we will also compare SEM to other stocks including Monogram Residential Trust Inc (NYSE:MORE), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), and Inphi Corporation (NYSE:IPHI) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading Select Medical Holdings Corporation (NYSE:SEM)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, down by 19% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in SEM at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, North Tide Capital, led by Conan Laughlin, holds the most valuable position in Select Medical Holdings Corporation (NYSE:SEM). North Tide Capital has a $176.9 million position in the stock, comprising 19.3% of its 13F portfolio. Coming in second is Stephen DuBois of Camber Capital Management, with a $81.3 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Ken Fisher’s Fisher Asset Management, Barry Rosenstein’s JANA Partners and James E. Flynn’s Deerfield Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Select Medical Holdings Corporation (NYSE:SEM) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that slashed their positions entirely heading into Q4. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $11.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $1.9 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to Select Medical Holdings Corporation (NYSE:SEM). These stocks are Monogram Residential Trust Inc (NYSE:MORE), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), Inphi Corporation (NYSE:IPHI), and HNI Corp (NYSE:HNI). This group of stocks’ market values resemble SEM’s market value.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $310 million. That figure was $412 million in SEM’s case. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Monogram Residential Trust Inc (NYSE:MORE) is the least popular one with only 12 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NXST might be a better candidate to consider taking a long position in.

Disclosure: None