Is Cardinal Health Inc (CAH) A Good Stock To Buy?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the elite funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cardinal Health Inc (NYSE:CAH).

Is Cardinal Health Inc (NYSE:CAH) a buy, sell, or hold? Hedge funds are becoming less hopeful. The number of long hedge fund bets shrunk by 8 in recent months. CAH was in 26 hedge funds’ portfolios at the end of the third quarter of 2016. There were 34 hedge funds in our database with CAH positions at the end of the previous quarter. 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 Edison International (NYSE:EIX), LinkedIn Corp (NYSE:LNKD), and Archer Daniels Midland Company (NYSE:ADM) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading Cardinal Health Inc (NYSE:CAH)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 24% from the second quarter of 2016, as hedge fund positions slide to a new low over the past five quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, AQR Capital Management, run by Cliff Asness, holds the most valuable position in Cardinal Health Inc (NYSE:CAH). According to regulatory filings, the fund has a $121.6 million position in the stock. Sitting at the No. 2 spot is D E Shaw, founded by David E. Shaw, which holds a $100.6 million position. Other peers that hold long positions encompass Steven Richman’s East Side Capital (RR Partners), David Harding’s Winton Capital Management, and Joel Greenblatt’s Gotham Asset Management.

Since Cardinal Health Inc (NYSE:CAH) has faced falling interest from hedge fund managers, it’s easy to see that there exists a select few funds that elected to cut their full holdings in the third quarter. Intriguingly, Samuel Isaly’s OrbiMed Advisors dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling an estimated $13 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $4.8 million worth of CAH shares. These moves are important to note, as total hedge fund interest fell by 8 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Cardinal Health Inc (NYSE:CAH). These stocks are Edison International (NYSE:EIX), LinkedIn Corp (NYSE:LNKD), Archer Daniels Midland Company (NYSE:ADM), and Equity Residential (NYSE:EQR). This group of stocks’ market valuations are similar to CAH’s market valuation.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.74 billion. That figure was a modest $666 million in CAH’s case. LinkedIn Corp (NYSE:LNKD) is the most popular stock in this table. On the other hand Edison International (NYSE:EIX) is the least popular one with only 19 bullish hedge fund positions. Cardinal Health Inc (NYSE:CAH) 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 LNKD might be a better candidate to consider a long position in.

Disclosure: None