In this article we will take a look at whether hedge funds think AMN Healthcare Services Inc (NYSE:AMN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
AMN Healthcare Services Inc (NYSE:AMN) was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. AMN has seen an increase in enthusiasm from smart money in recent months. There were 10 hedge funds in our database with AMN positions at the end of the previous quarter. Our calculations also showed that AMN 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.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Chuck Royce of Royce & Associates
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the key hedge fund action regarding AMN Healthcare Services Inc (NYSE:AMN).
How have hedgies been trading AMN Healthcare Services Inc (NYSE:AMN)?
Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 120% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMN over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AMN Healthcare Services Inc (NYSE:AMN) was held by Intrinsic Edge Capital, which reported holding $22 million worth of stock at the end of September. It was followed by Millennium Management with a $20.5 million position. Other investors bullish on the company included Royce & Associates, Balyasny Asset Management, and Prosight Capital. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to AMN Healthcare Services Inc (NYSE:AMN), around 2.92% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, earmarking 2.26 percent of its 13F equity portfolio to AMN.
Consequently, some big names have been driving this bullishness. Intrinsic Edge Capital, managed by Mark Coe, initiated the most valuable position in AMN Healthcare Services Inc (NYSE:AMN). Intrinsic Edge Capital had $22 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also made a $4.8 million investment in the stock during the quarter. The following funds were also among the new AMN investors: Greg Eisner’s Engineers Gate Manager, Renaissance Technologies, and Mike Vranos’s Ellington.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AMN Healthcare Services Inc (NYSE:AMN) but similarly valued. These stocks are The Hain Celestial Group, Inc. (NASDAQ:HAIN), Appian Corporation (NASDAQ:APPN), Farfetch Limited (NYSE:FTCH), and Spirit Realty Capital Inc (NYSE:SRC). This group of stocks’ market valuations resemble AMN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAIN | 20 | 704604 | 3 |
| APPN | 17 | 374002 | 0 |
| FTCH | 22 | 400841 | -5 |
| SRC | 18 | 76385 | -8 |
| Average | 19.25 | 388958 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $79 million in AMN’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. AMN Healthcare Services Inc (NYSE:AMN) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately AMN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMN were disappointed as the stock returned -14% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
