As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Signify Health, Inc. (NYSE:SGFY).
Is SGFY a good stock to buy? Investors who are in the know were buying. The number of bullish hedge fund bets moved up by 28 recently. Signify Health, Inc. (NYSE:SGFY) was in 28 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that SGFY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Lee Ainslie of Maverick Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to view the recent hedge fund action encompassing Signify Health, Inc. (NYSE:SGFY).
Do Hedge Funds Think SGFY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28 from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SGFY over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Signify Health, Inc. (NYSE:SGFY) was held by ARK Investment Management, which reported holding $49.6 million worth of stock at the end of December. It was followed by Marshall Wace LLP with a $31.7 million position. Other investors bullish on the company included Millennium Management, Maverick Capital, and Deerfield Management. In terms of the portfolio weights assigned to each position Integral Health Asset Management allocated the biggest weight to Signify Health, Inc. (NYSE:SGFY), around 1.34% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, designating 0.58 percent of its 13F equity portfolio to SGFY.
As one would reasonably expect, key money managers have been driving this bullishness. ARK Investment Management, managed by Catherine D. Wood, initiated the most valuable position in Signify Health, Inc. (NYSE:SGFY). ARK Investment Management had $49.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $31.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Lee Ainslie’s Maverick Capital, and James E. Flynn’s Deerfield Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Signify Health, Inc. (NYSE:SGFY) but similarly valued. We will take a look at STAAR Surgical Company (NASDAQ:STAA), Lazard Ltd (NYSE:LAZ), Rackspace Technology, Inc. (NASDAQ:RXT), Spirit Realty Capital Inc (NYSE:SRC), American Eagle Outfitters Inc. (NYSE:AEO), AppFolio Inc (NASDAQ:APPF), and Graphic Packaging Holding Company (NYSE:GPK). This group of stocks’ market values are similar to SGFY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STAA | 16 | 1291146 | -1 |
| LAZ | 19 | 770857 | -1 |
| RXT | 11 | 125806 | -3 |
| SRC | 18 | 166994 | 1 |
| AEO | 43 | 948063 | 4 |
| APPF | 12 | 394366 | -7 |
| GPK | 21 | 476673 | -5 |
| Average | 20 | 596272 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $596 million. That figure was $189 million in SGFY’s case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 11 bullish hedge fund positions. Signify Health, Inc. (NYSE:SGFY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SGFY is 52.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately SGFY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SGFY were disappointed as the stock returned -1% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Signify Health Inc. (NYSE:SGFY)
Follow Signify Health Inc. (NYSE:SGFY)
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Disclosure: None. This article was originally published at Insider Monkey.
