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 (read our latest 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 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cardinal Health, Inc. (NYSE:CAH).
Is Cardinal Health, Inc. (NYSE:CAH) going to take off soon? Money managers are taking an optimistic view. The number of long hedge fund bets rose by 6 recently. Our calculations also showed that CAH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
At the moment there are many indicators market participants put to use to size up publicly traded companies. A duo of the less utilized indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a healthy margin (see the details here).
Richard S. Pzena of Pzena Investment Management
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 let’s take a peek at the new hedge fund action regarding Cardinal Health, Inc. (NYSE:CAH).
What have hedge funds been doing with Cardinal Health, Inc. (NYSE:CAH)?
At Q4’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the third quarter of 2019. On the other hand, there were a total of 35 hedge funds with a bullish position in CAH 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Cardinal Health, Inc. (NYSE:CAH). Pzena Investment Management has a $202.3 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is D E Shaw, led by D. E. Shaw, holding a $87.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Jim Simons (founder)’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to Cardinal Health, Inc. (NYSE:CAH), around 5.21% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 2.39 percent of its 13F equity portfolio to CAH.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in Cardinal Health, Inc. (NYSE:CAH). Millennium Management had $18.5 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also initiated a $4.5 million position during the quarter. The following funds were also among the new CAH investors: Matthew Hulsizer’s PEAK6 Capital Management, Michael Gelband’s ExodusPoint Capital, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cardinal Health, Inc. (NYSE:CAH) but similarly valued. These stocks are Agnico Eagle Mines Limited (NYSE:AEM), Brookfield Infrastructure Partners L.P. (NYSE:BIP), RingCentral Inc (NYSE:RNG), and Genmab A/S (NASDAQ:GMAB). This group of stocks’ market valuations are similar to CAH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEM | 34 | 413114 | 0 |
| BIP | 11 | 59005 | 3 |
| RNG | 62 | 2456273 | 10 |
| GMAB | 12 | 107919 | 1 |
| Average | 29.75 | 759078 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $759 million. That figure was $668 million in CAH’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 11 bullish hedge fund positions. Cardinal Health, Inc. (NYSE:CAH) is not the most popular stock in this group but hedge fund interest is still above average. 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 beat the market by 3.2 percentage points. Hedge funds were also right about betting on CAH as the stock returned -12.6% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
