The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Change Healthcare Inc. (NASDAQ:CHNG) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.
Is Change Healthcare Inc. (NASDAQ:CHNG) an excellent investment today? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund bets decreased by 1 recently. Change Healthcare Inc. (NASDAQ:CHNG) was in 50 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 56. Our calculations also showed that CHNG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the new hedge fund action encompassing Change Healthcare Inc. (NASDAQ:CHNG).
David Abrams of Abrams Capital Management
Do Hedge Funds Think CHNG Is A Good Stock To Buy Now?
At Q3’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CHNG over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Change Healthcare Inc. (NASDAQ:CHNG) was held by Abrams Capital Management, which reported holding $355.5 million worth of stock at the end of September. It was followed by Magnetar Capital with a $153 million position. Other investors bullish on the company included Park West Asset Management, Camber Capital Management, and Alpine Associates. In terms of the portfolio weights assigned to each position Abrams Capital Management allocated the biggest weight to Change Healthcare Inc. (NASDAQ:CHNG), around 7.75% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, setting aside 6.58 percent of its 13F equity portfolio to CHNG.
Due to the fact that Change Healthcare Inc. (NASDAQ:CHNG) has faced falling interest from the smart money, logic holds that there was a specific group of hedgies who sold off their entire stakes heading into Q4. It’s worth mentioning that Renaissance Technologies dumped the biggest position of all the hedgies followed by Insider Monkey, comprising about $19.4 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund said goodbye to about $7.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Change Healthcare Inc. (NASDAQ:CHNG). We will take a look at Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Virgin Galactic Holdings, Inc. (NYSE:SPCE), Varonis Systems Inc (NASDAQ:VRNS), First Financial Bankshares Inc (NASDAQ:FFIN), Healthcare Trust Of America Inc (NYSE:HTA), Mattel, Inc. (NASDAQ:MAT), and TaskUs Inc. (NASDAQ:TASK). All of these stocks’ market caps are closest to CHNG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARWR | 24 | 150783 | -6 |
| SPCE | 16 | 105669 | -2 |
| VRNS | 27 | 298396 | 3 |
| FFIN | 20 | 81284 | 12 |
| HTA | 14 | 381781 | -9 |
| MAT | 34 | 1030578 | 9 |
| TASK | 18 | 230676 | 18 |
| Average | 21.9 | 325595 | 3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $1558 million in CHNG’s case. Mattel, Inc. (NASDAQ:MAT) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Change Healthcare Inc. (NASDAQ:CHNG) is more popular among hedge funds. Our overall hedge fund sentiment score for CHNG is 80.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, CHNG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CHNG were disappointed as the stock returned -6% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Change Healthcare Inc. (NASDAQ:CHNG)
Follow Change Healthcare Inc. (NASDAQ:CHNG)
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Disclosure: None. This article was originally published at Insider Monkey.
