The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at HEALTHSOUTH Corp. (NYSE:HLS) from the perspective of those elite funds.
HEALTHSOUTH Corp. was in 22 hedge funds’ portfolios at the end of September. HLS has experienced a decrease in hedge fund sentiment in recent months. There were 25 hedge funds in our database with HLS 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 DealerTrack Technologies Inc (NASDAQ:TRAK), Trinity Industries, Inc. (NYSE:TRN), and Intrexon Corp (NYSE:XON) to gather more data points.
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Now, we’re going to take a look at the new action regarding HEALTHSOUTH Corp. (NYSE:HLS).
How have hedgies been trading HEALTHSOUTH Corp. (NYSE:HLS)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Glenview Capital, managed by Larry Robbins, holds the biggest position in HEALTHSOUTH Corp. (NYSE:HLS). Glenview Capital has a $261.6 million position in the stock, comprising 1.3% of its 13F portfolio. On Glenview Capital’s heels is Daruma Asset Management, managed by Mariko Gordon, which holds a $56.3 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish contain Lee Munder’s Lee Munder Capital Group, Dmitry Balyasny’s Balyasny Asset Management and Chuck Royce’s Royce & Associates.
Since HEALTHSOUTH Corp. (NYSE:HLS) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who sold off their positions entirely by the end of the third quarter. Intriguingly, John Osterweis’s Osterweis Capital Management said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $54.8 million in call options., and Mark Kingdon’s Kingdon Capital was right behind this move, as the fund dumped about $4.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to HEALTHSOUTH Corp. (NYSE:HLS). These stocks are DealerTrack Technologies Inc (NASDAQ:TRAK), Trinity Industries, Inc. (NYSE:TRN), Intrexon Corp (NYSE:XON), and NuStar Energy L.P. (NYSE:NS). This group of stocks’ market valuations resemble HLS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRAK | 32 | 684733 | 7 |
| TRN | 23 | 210148 | -3 |
| XON | 17 | 205510 | -4 |
| NS | 11 | 53485 | -1 |
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $471 million in HLS’s case. DealerTrack Technologies Inc (NASDAQ:TRAK) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 11 bullish hedge fund positions. HEALTHSOUTH Corp. (NYSE:HLS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TRAK might be a better candidate to consider a long position.
