Is Community Health Systems, Inc. (CYH) A Good Stock To Buy?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process 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 Community Health Systems, Inc. (NYSE:CYH).

Is CYH a good stock to buy? Community Health Systems, Inc. (NYSE:CYH) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Community Health Systems (NYSE:CYH) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 59. Our calculations also showed that CYH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kamran Moghtaderi of Eversept Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s review the new hedge fund action regarding Community Health Systems, Inc. (NYSE:CYH).

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

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in CYH a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Community Health Systems, Inc. (NYSE:CYH) was held by Eversept Partners, which reported holding $59 million worth of stock at the end of June. It was followed by D E Shaw with a $49.3 million position. Other investors bullish on the company included Royce & Associates, Centerbridge Partners, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to Community Health Systems, Inc. (NYSE:CYH), around 4.63% of its 13F portfolio. Centerbridge Partners is also relatively very bullish on the stock, earmarking 3.32 percent of its 13F equity portfolio to CYH.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Clough Capital Partners, managed by Charles Clough, assembled the biggest position in Community Health Systems, Inc. (NYSE:CYH). Clough Capital Partners had $5.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new CYH investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks similar to Community Health Systems, Inc. (NYSE:CYH). These stocks are DiamondRock Hospitality Company (NYSE:DRH), Cavco Industries, Inc. (NASDAQ:CVCO), Kadant Inc. (NYSE:KAI), Progress Software Corporation (NASDAQ:PRGS), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Madison Square Garden Entertainment Corp. (NYSE:MSGE), and Otter Tail Corporation (NASDAQ:OTTR). This group of stocks’ market valuations are similar to CYH’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $301 million in CYH’s case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Otter Tail Corporation (NASDAQ:OTTR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Community Health Systems, Inc. (NYSE:CYH) is more popular among hedge funds. Our overall hedge fund sentiment score for CYH is 71.7. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately CYH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CYH were disappointed as the stock returned -26.8% since the end of the second quarter (through 10/22) 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 most of these stocks already outperformed the market since 2019.

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