We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Molina Healthcare, Inc. (NYSE:MOH) based on those filings.
Is Molina Healthcare, Inc. (NYSE:MOH) going to take off soon? The smart money is betting on the stock. The number of long hedge fund bets rose by 8 in recent months. Our calculations also showed that MOH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the new hedge fund action encompassing Molina Healthcare, Inc. (NYSE:MOH).
What have hedge funds been doing with Molina Healthcare, Inc. (NYSE:MOH)?
At Q4’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MOH over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Molina Healthcare, Inc. (NYSE:MOH), which was worth $566 million at the end of the third quarter. On the second spot was Viking Global which amassed $313.7 million worth of shares. Iridian Asset Management, AQR Capital Management, and D E Shaw 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 Tavio Capital allocated the biggest weight to Molina Healthcare, Inc. (NYSE:MOH), around 9.54% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, designating 2.37 percent of its 13F equity portfolio to MOH.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Taconic Capital, managed by Frank Brosens, assembled the largest position in Molina Healthcare, Inc. (NYSE:MOH). Taconic Capital had $4.1 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $3 million investment in the stock during the quarter. The following funds were also among the new MOH investors: Matthew Hulsizer’s PEAK6 Capital Management, Mike Vranos’s Ellington, and David Harding’s Winton Capital Management.
Let’s check out hedge fund activity in other stocks similar to Molina Healthcare, Inc. (NYSE:MOH). We will take a look at Cable One Inc (NYSE:CABO), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Pool Corporation (NASDAQ:POOL), and The Toro Company (NYSE:TTC). This group of stocks’ market valuations are similar to MOH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CABO | 19 | 578805 | 5 |
| IONS | 27 | 444148 | 1 |
| POOL | 28 | 445007 | -2 |
| TTC | 23 | 773670 | 2 |
| Average | 24.25 | 560408 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $560 million. That figure was $1277 million in MOH’s case. Pool Corporation (NASDAQ:POOL) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Molina Healthcare, Inc. (NYSE:MOH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still managed to beat the market by 3.2 percentage points. Hedge funds were also right about betting on MOH as the stock returned -10.3% so far in Q1 (through March 16th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
