Is Cerner Corporation (CERN) Going to Burn These Hedge Funds?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cerner Corporation (NASDAQ:CERN).

Cerner Corporation (NASDAQ:CERN) was in 36 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 41. CERN investors should be aware of a decrease in activity from the world’s largest hedge funds lately. There were 38 hedge funds in our database with CERN positions at the end of the second quarter. Our calculations also showed that CERN 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. Keeping this in mind we’re going to check out the key hedge fund action encompassing Cerner Corporation (NASDAQ:CERN).

Jeffrey Smith of Starboard Value LP

Do Hedge Funds Think CERN Is A Good Stock To Buy Now?

At third quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CERN over the last 25 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Cerner Corporation (NASDAQ:CERN) was held by Starboard Value LP, which reported holding $228.9 million worth of stock at the end of September. It was followed by D E Shaw with a $184.1 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Nitorum Capital. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Cerner Corporation (NASDAQ:CERN), around 6.14% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, designating 4.19 percent of its 13F equity portfolio to CERN.

Because Cerner Corporation (NASDAQ:CERN) has faced falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers who sold off their full holdings in the third quarter. At the top of the heap, Mina Faltas’s Washington Harbour Partners dropped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $10 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $9.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Cerner Corporation (NASDAQ:CERN). These stocks are Ameren Corporation (NYSE:AEE), CGI Inc. (NYSE:GIB), Charles River Laboratories International Inc. (NYSE:CRL), Essex Property Trust Inc (NYSE:ESS), MGM Resorts International (NYSE:MGM), Trimble Inc. (NASDAQ:TRMB), and KeyCorp (NYSE:KEY). All of these stocks’ market caps resemble CERN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1021 million. That figure was $1280 million in CERN’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Ameren Corporation (NYSE:AEE) is the least popular one with only 14 bullish hedge fund positions. Cerner Corporation (NASDAQ:CERN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CERN is 59.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CERN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CERN were disappointed as the stock returned -0.1% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

Suggested Articles:

• Top Pharmaceutical Companies in India
• 10 Best Advertising Stocks To Buy Now
• 10 Popular Penny Stocks on Robinhood

Disclosure: None. This article was originally published at Insider Monkey.