Is Express Scripts Holding Company (ESRX) A Good Stock To Buy?

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Express Scripts Holding Company (NASDAQ:ESRX) has experienced a decrease in support from the world’s most elite money managers of late. ESRX was in 58 hedge funds’ portfolios at the end of September. There were 62 hedge funds in our database with ESRX holdings 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 Twenty-First Century Fox Inc (NASDAQ:FOX), ING Groep N.V. (ADR) (NYSE:ING), and Prudential Public Limited Company (ADR) (NYSE:PUK) to gather more data points.

Keeping this in mind, let’s take a peek at the fresh action encompassing Express Scripts Holding Company (NASDAQ:ESRX).

How are hedge funds trading Express Scripts Holding Company (NASDAQ:ESRX)?

At Q3’s end, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Laurion Capital Management, managed by Benjamin A. Smith, holds the biggest position in Express Scripts Holding Company (NASDAQ:ESRX). Laurion Capital Management has a $491.4 million call position in the stock, comprising 5.7% of its 13F portfolio. Coming in second is FPR Partners, managed by Bob Peck and Andy Raab, which holds a $394.6 million position; 9.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Andy Brown’s Cedar Rock Capital, John Shapiro’s Chieftain Capital and Michael Lowenstein’s Kensico Capital.

Since Express Scripts Holding Company (NASDAQ:ESRX) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings heading into Q4. Intriguingly, Glenn Greenberg’s Brave Warrior Capital dumped the largest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $154.7 million in call options. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its call options, about $26.7 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Express Scripts Holding Company (NASDAQ:ESRX) but similarly valued. We will take a look at Twenty-First Century Fox Inc (NASDAQ:FOX), ING Groep N.V. (ADR) (NYSE:ING), Prudential Public Limited Company (ADR) (NYSE:PUK), and Honda Motor Co Ltd (ADR) (NYSE:HMC). This group of stocks’ market valuations are similar to ESRX’s market valuation.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $1,112 million. That figure was $3,434 million in ESRX’s case. Twenty-First Century Fox Inc (NASDAQ:FOX) is the most popular stock in this table. On the other hand Prudential Public Limited Company (ADR) (NYSE:PUK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Express Scripts Holding Company (NASDAQ:ESRX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.