With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Stryker Corporation (NYSE:SYK).
Is Stryker Corporation (NYSE:SYK) the right pick for your portfolio? Prominent investors are becoming less hopeful. The number of long hedge fund positions retreated by 10 recently. Our calculations also showed that syk isn’t among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Cliff Asness of AQR Capital Management
We’re going to take a look at the recent hedge fund action surrounding Stryker Corporation (NYSE:SYK).
What does the smart money think about Stryker Corporation (NYSE:SYK)?
At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in SYK over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Stryker Corporation (NYSE:SYK) was held by Partner Fund Management, which reported holding $114.5 million worth of stock at the end of March. It was followed by Millennium Management with a $107.2 million position. Other investors bullish on the company included AQR Capital Management, Adage Capital Management, and Citadel Investment Group.
Due to the fact that Stryker Corporation (NYSE:SYK) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who sold off their positions entirely last quarter. Intriguingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital dropped the largest position of the 700 funds monitored by Insider Monkey, totaling an estimated $32.1 million in stock. Arthur B Cohen and Joseph Healey’s fund, Healthcor Management LP, also dropped its stock, about $17.9 million worth. These moves are important to note, as total hedge fund interest fell by 10 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Stryker Corporation (NYSE:SYK) but similarly valued. We will take a look at Enbridge Inc (NYSE:ENB), Banco Bradesco SA (NYSE:BBD), Equinor ASA (NYSE:EQNR), and Morgan Stanley (NYSE:MS). This group of stocks’ market valuations are closest to SYK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENB | 20 | 173528 | 2 |
| BBD | 18 | 753361 | 2 |
| EQNR | 10 | 352240 | -3 |
| MS | 54 | 4060103 | -3 |
| Average | 25.5 | 1334808 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $1335 million. That figure was $635 million in SYK’s case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 10 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SYK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SYK were disappointed as the stock returned -7% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
