Here is What Hedge Funds Think About Magellan Health Inc (MGLN)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Magellan Health Inc (NASDAQ:MGLN).

Magellan Health Inc (NASDAQ:MGLN) investors should be aware of an increase in hedge fund sentiment lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Virgin America Inc (NASDAQ:VA), 2U Inc (NASDAQ:TWOU), and MSA Safety Inc (NYSE:MSA) to gather more data points.

In today’s marketplace, there are many gauges shareholders use to analyze stocks. A duo of the less utilized gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the broader indices by a healthy amount (see the details here).

With all of this in mind, let’s take a glance at the key action regarding Magellan Health Inc (NASDAQ:MGLN).

How have hedgies been trading Magellan Health Inc (NASDAQ:MGLN)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 29% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the most valuable position in Magellan Health Services Inc (NASDAQ:MGLN). OrbiMed Advisors has a $101.6 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $51.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, Ken Fisher’s Fisher Asset Management, and Anders Hallberg and Carl Bennet’s HealthInvest Partners AB.

Consequently, specific money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most outsized position in Magellan Health Services Inc (NASDAQ:MGLN). Two Sigma Advisors had $2.4 million invested in the company at the end of the quarter. Neil Chriss’s Hutchin Hill Capital also initiated a $2 million position during the quarter. The following funds were also among the new MGLN investors: Peter Muller’s PDT Partners, Mike Vranos’s Ellington, and Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Magellan Health Services Inc (NASDAQ:MGLN) but similarly valued. We will take a look at Virgin America Inc (NASDAQ:VA), 2U Inc (NASDAQ:TWOU), MSA Safety Inc (NYSE:MSA), and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). All of these stocks’ market caps are closest to Magellan Health Inc (NASDAQ:MGLN)’s market cap.

As you can see, these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $257 million in Magellan Health Inc (NASDAQ:MGLN)’s case. Virgin America Inc (NASDAQ:VA) is the most popular stock in this table. On the other hand, Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the least popular one with only 17 bullish hedge fund positions. Magellan Health Services Inc (NASDAQ:MGLN) 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, Virgin America Inc (NASDAQ:VA) might be a better candidate to consider a long position.