Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at McKesson Corporation (NYSE:MCK) from the perspective of those elite funds.
Is McKesson Corporation (NYSE:MCK) the right pick for your portfolio? The smart money is in a pessimistic mood. The number of bullish hedge fund positions decreased by 12 recently. Our calculations also showed that MCK isn’t among the 30 most popular stocks among hedge funds. MCK was in 32 hedge funds’ portfolios at the end of the first quarter of 2019. There were 44 hedge funds in our database with MCK holdings at the end of the previous quarter.
In the eyes of most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are over 8000 funds with their doors open today, We choose to focus on the bigwigs of this group, approximately 750 funds. These hedge fund managers command the majority of the hedge fund industry’s total capital, and by shadowing their unrivaled picks, Insider Monkey has come up with a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We’re going to check out the key hedge fund action encompassing McKesson Corporation (NYSE:MCK).
How have hedgies been trading McKesson Corporation (NYSE:MCK)?
At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in MCK 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.
Among these funds, Glenview Capital held the most valuable stake in McKesson Corporation (NYSE:MCK), which was worth $575.8 million at the end of the first quarter. On the second spot was Pzena Investment Management which amassed $431.2 million worth of shares. Moreover, AQR Capital Management, Baupost Group, and Millennium Management were also bullish on McKesson Corporation (NYSE:MCK), allocating a large percentage of their portfolios to this stock.
Since McKesson Corporation (NYSE:MCK) has faced declining sentiment from the smart money, we can see that there was a specific group of money managers that decided to sell off their entire stakes last quarter. Intriguingly, Stephen DuBois’s Camber Capital Management said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $96.7 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $30.1 million worth. These moves are interesting, as total hedge fund interest dropped by 12 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to McKesson Corporation (NYSE:MCK). We will take a look at Realty Income Corporation (NYSE:O), Concho Resources Inc. (NYSE:CXO), TELUS Corporation (NYSE:TU), and Parker-Hannifin Corporation (NYSE:PH). This group of stocks’ market valuations resemble MCK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| O | 15 | 175737 | -3 |
| CXO | 26 | 530505 | -9 |
| TU | 13 | 336110 | 2 |
| PH | 28 | 516590 | -2 |
| Average | 20.5 | 389736 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $1989 million in MCK’s case. Parker-Hannifin Corporation (NYSE:PH) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks McKesson Corporation (NYSE:MCK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MCK as the stock returned 5.8% during the same period 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.
Disclosure: None. This article was originally published at Insider Monkey.
