Is Magellan Health Inc (MGLN) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Magellan Health Inc (NASDAQ:MGLN).

Magellan Health Inc (NASDAQ:MGLN) was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. MGLN has experienced a decrease in hedge fund interest lately. There were 19 hedge funds in our database with MGLN positions at the end of the previous quarter. Our calculations also showed that MGLN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are seen as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, We hone in on the masters of this club, approximately 850 funds. Most estimates calculate that this group of people orchestrate bulk of all hedge funds’ total capital, and by watching their first-class equity investments, Insider Monkey has spotted various investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing Magellan Health Inc (NASDAQ:MGLN).

Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in MGLN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Starboard Value LP held the most valuable stake in Magellan Health Inc (NASDAQ:MGLN), which was worth $114 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $39.2 million worth of shares. Point72 Asset Management, D E Shaw, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to Magellan Health Inc (NASDAQ:MGLN), around 4.62% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, setting aside 3.63 percent of its 13F equity portfolio to MGLN.

Since Magellan Health Inc (NASDAQ:MGLN) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who sold off their entire stakes by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $9.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $3.8 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Magellan Health Inc (NASDAQ:MGLN) but similarly valued. We will take a look at Ligand Pharmaceuticals Inc. (NASDAQ:LGND), MicroStrategy Incorporated (NASDAQ:MSTR), Innoviva, Inc. (NASDAQ:INVA), and Atrion Corporation (NASDAQ:ATRI). This group of stocks’ market caps are similar to MGLN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $235 million in MGLN’s case. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the most popular stock in this table. On the other hand Atrion Corporation (NASDAQ:ATRI) is the least popular one with only 12 bullish hedge fund positions. Magellan Health Inc (NASDAQ:MGLN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MGLN as the stock returned 48.1% during the second quarter and outperformed the market by an even larger margin.

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