The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Magellan Health Inc (NASDAQ:MGLN).
Is Magellan Health Inc (NASDAQ:MGLN) a healthy stock for your portfolio? Hedge funds are becoming less confident. The number of bullish hedge fund bets shrunk by 2 recently. Our calculations also showed that MGLN 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.
Why do we pay any attention at all to hedge fund sentiment? 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.
Jeffrey Smith of Starboard Value LP
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the fresh hedge fund action surrounding Magellan Health Inc (NASDAQ:MGLN).
Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MGLN over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jeffrey Smith’s Starboard Value LP has the biggest position in Magellan Health Inc (NASDAQ:MGLN), worth close to $147.1 million, amounting to 4.9% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $39.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include David E. Shaw’s D E Shaw, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to Magellan Health Inc (NASDAQ:MGLN), around 4.91% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 3.63 percent of its 13F equity portfolio to MGLN.
Since Magellan Health Inc (NASDAQ:MGLN) has faced a decline in interest from hedge fund managers, it’s easy to see that there were a few fund managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Glenn W. Welling’s Engaged Capital dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $28.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $21.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Magellan Health Inc (NASDAQ:MGLN) but similarly valued. These stocks are Harsco Corporation (NYSE:HSC), Bandwidth Inc. (NASDAQ:BAND), MicroStrategy Incorporated (NASDAQ:MSTR), and eHealth, Inc. (NASDAQ:EHTH). This group of stocks’ market values are similar to MGLN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSC | 18 | 181922 | 0 |
| BAND | 20 | 134079 | 2 |
| MSTR | 20 | 164593 | 3 |
| EHTH | 21 | 278384 | -5 |
| Average | 19.75 | 189745 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $284 million in MGLN’s case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand Harsco Corporation (NYSE:HSC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Magellan Health Inc (NASDAQ:MGLN) is even less popular than HSC. Hedge funds clearly dropped the ball on MGLN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 MGLN as the stock returned 25.2% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
