Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of HMS Holdings Corp. (NASDAQ:HMSY).
Is HMS Holdings Corp. (NASDAQ:HMSY) ready to rally soon? The best stock pickers are getting more bullish. The number of bullish hedge fund bets increased by 6 recently. Our calculations also showed that HMSY isn’t among the 30 most popular stocks among hedge funds. HMSY was in 22 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with HMSY positions at the end of the previous quarter.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s analyze the recent hedge fund action surrounding HMS Holdings Corp. (NASDAQ:HMSY).
Hedge fund activity in HMS Holdings Corp. (NASDAQ:HMSY)
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in HMSY a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in HMS Holdings Corp. (NASDAQ:HMSY), which was worth $27.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $25.2 million worth of shares. Moreover, Citadel Investment Group, Arrowstreet Capital, and Winton Capital Management were also bullish on HMS Holdings Corp. (NASDAQ:HMSY), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, some big names have jumped into HMS Holdings Corp. (NASDAQ:HMSY) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in HMS Holdings Corp. (NASDAQ:HMSY). Marshall Wace LLP had $4.7 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new HMSY investors: David Costen Haley’s HBK Investments, Paul Tudor Jones’s Tudor Investment Corp, and Benjamin A. Smith’s Laurion Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as HMS Holdings Corp. (NASDAQ:HMSY) but similarly valued. We will take a look at Transportadora de Gas del Sur SA (NYSE:TGS), AmeriGas Partners, L.P. (NYSE:APU), TC Pipelines, LP (NYSE:TCP), and TerraForm Power Inc (NASDAQ:TERP). This group of stocks’ market valuations are closest to HMSY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGS | 8 | 42096 | -1 |
| APU | 4 | 18074 | -2 |
| TCP | 2 | 4806 | -2 |
| TERP | 8 | 192144 | -6 |
| Average | 5.5 | 64280 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $135 million in HMSY’s case. Transportadora de Gas del Sur SA (NYSE:TGS) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks HMS Holdings Corp. (NASDAQ:HMSY) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HMSY wasn’t nearly as popular as these 15 stock and hedge funds that were betting on HMSY were disappointed as the stock returned 0.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
