IPC Healthcare Inc (NASDAQ:IPCM) surged by around 35% and hit a lifetime high on Tuesday following the announcement regarding its acquisition by Team Health Holdings LLC (NYSE:TMH). IPC Healthcare Inc (NASDAQ:IPCM) has agreed to be acquired by Team Health Holdings for a price of $80.25 per share or $1.6 billion in total, which is a 37.3% premium to the closing price on Monday. The deal is expected to close in the fourth quarter.
IPC Healthcare Inc (NASDAQ:IPCM) reported its financial results for the second quarter on July 29. The acute hospitalist posted EPS of $0.53, missing the consensus expectation by $0.01 with a revenue of $184 million for the quarter, $2.05 million below the consensus estimate.
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Heading into the second quarter, a total of seven of the hedge funds tracked by Insider Monkey were bullish on IPC Healthcare Inc (NASDAQ:IPCM), holding in aggregate $18.6 million worth of stock, which is 1.5% lower than aggregate capital held by nine funds at the end of 2014. During the January – March period, the stock has appreciated by 1.6%, which shows an outflow of capital from the company. In this way, it seems that hedge funds have not anticipated a takeover deal as they have been bearish on the stock.
Why do we pay attention to hedge fund sentiment surrounding a company? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 123% over the last 35 months and outperformed the S&P 500 ETF (SPY) by 56 percentage points (see the details here).
With this in mine, let’s take a look at the latest hedge funds’ moves involving IPC Healthcare Inc (NASDAQ:IPCM).
What does the smart money think about IPC Healthcare Inc (NASDAQ:IPCM)?
When looking at the investors followed by Insider Monkey, Bill Miller‘s Legg Mason Capital Management had the largest stake in IPC Healthcare Inc (NASDAQ:IPCM), with around 172,000 shares worth close to $8 million. Coming in second is Point72 Asset Management, led by Steve Cohen, which initiated a stake with 84,500 shares valued at $3.9 million. Other peers that hold long positions, include John Overdeck and David Siegel’s Two Sigma Advisors, Stuart Weisbrod’s Iguana Healthcare Management and Glenn Russell Dubin’s Highbridge Capital Management.
On the other hand, a number of funds decided to close their stakes in the company. Among them is Paul Marshall and Ian Wace’s Marshall Wace LLC, which sold all its 46,529 shares during the first three months, while Israel Englander of Millennium Management, disposed of 22,000 shares during the same period.
Even though most hedge funds have not anticipated such a development for IPC Healthcare Inc (NASDAQ:IPCM), some investors bet on the company’s stock gaining ground as they initiated new positions in the company, such as Steve Cohen and Stuart Weisbrod. Therefore, this case as well as many others from the past show why tracking hedge fund activity could help a retail investor to gain an edge over the rest of the crowd.
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