Is MPLN Stock A Buy or Sell?

In this article we will analyze whether MultiPlan Corporation (NYSE:MPLN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is MPLN stock a buy? MultiPlan Corporation (NYSE:MPLN) investors should pay attention to a decrease in hedge fund sentiment lately. MultiPlan Corporation (NYSE:MPLN) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 33. There were 33 hedge funds in our database with MPLN positions at the end of the third quarter. Our calculations also showed that MPLN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Alec Litowitz of Magnetar Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s check out the recent hedge fund action encompassing MultiPlan Corporation (NYSE:MPLN).

Do Hedge Funds Think MPLN Is A Good Stock To Buy Now?

At the end of December, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MPLN over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Leonard Green & Partners held the most valuable stake in MultiPlan Corporation (NYSE:MPLN), which was worth $307.2 million at the end of the fourth quarter. On the second spot was Magnetar Capital which amassed $71 million worth of shares. Arrowstreet Capital, Alyeska Investment Group, and Intrinsic Edge Capital 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 Leonard Green & Partners allocated the biggest weight to MultiPlan Corporation (NYSE:MPLN), around 4.25% of its 13F portfolio. Birch Grove Capital is also relatively very bullish on the stock, dishing out 1.4 percent of its 13F equity portfolio to MPLN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Leonard Green & Partners).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MultiPlan Corporation (NYSE:MPLN) but similarly valued. These stocks are Huntsman Corporation (NYSE:HUN), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Science Applications International Corp (NYSE:SAIC), Schrodinger, Inc. (NASDAQ:SDGR), Starwood Property Trust, Inc. (NYSE:STWD), People’s United Financial, Inc. (NASDAQ:PBCT), and Cullen/Frost Bankers, Inc. (NYSE:CFR). All of these stocks’ market caps are closest to MPLN’s market cap.

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As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $477 million in MPLN’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 13 bullish hedge fund positions. MultiPlan Corporation (NYSE:MPLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MPLN is 57.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately MPLN wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MPLN were disappointed as the stock returned -19.6% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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