Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Community Healthcare Trust Inc (NYSE:CHCT).
Community Healthcare Trust Inc (NYSE:CHCT) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. CHCT was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. There were 8 hedge funds in our database with CHCT holdings at the end of the previous quarter. Our calculations also showed that CHCT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a look at the latest hedge fund action regarding Community Healthcare Trust Inc (NYSE:CHCT).
What have hedge funds been doing with Community Healthcare Trust Inc (NYSE:CHCT)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CHCT over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Community Healthcare Trust Inc (NYSE:CHCT) was held by Cardinal Capital, which reported holding $53.9 million worth of stock at the end of September. It was followed by Millennium Management with a $11.9 million position. Other investors bullish on the company included Royce & Associates, Clough Capital Partners, and Dorset Management. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Community Healthcare Trust Inc (NYSE:CHCT), around 1.78% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, designating 1.12 percent of its 13F equity portfolio to CHCT.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in Community Healthcare Trust Inc (NYSE:CHCT). Driehaus Capital had $1.1 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.3 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Community Healthcare Trust Inc (NYSE:CHCT) but similarly valued. We will take a look at Hecla Mining Company (NYSE:HL), Phibro Animal Health Corp (NASDAQ:PAHC), PPDAI Group Inc. (NYSE:PPDF), and ArQule, Inc. (NASDAQ:ARQL). All of these stocks’ market caps resemble CHCT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HL | 10 | 22102 | 2 |
| PAHC | 17 | 52455 | 1 |
| PPDF | 8 | 11005 | 1 |
| ARQL | 24 | 218791 | -1 |
| Average | 14.75 | 76088 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $89 million in CHCT’s case. ArQule, Inc. (NASDAQ:ARQL) is the most popular stock in this table. On the other hand PPDAI Group Inc. (NYSE:PPDF) is the least popular one with only 8 bullish hedge fund positions. Community Healthcare Trust Inc (NYSE:CHCT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CHCT, though not to the same extent, as the stock returned 7.8% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
