Is USPH A Good Stock To Buy Now?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards U.S. Physical Therapy, Inc. (NYSE:USPH) to find out whether there were any major changes in hedge funds’ views.

Is USPH a good stock to buy now? U.S. Physical Therapy, Inc. (NYSE:USPH) has seen an increase in enthusiasm from smart money in recent months. U.S. Physical Therapy, Inc. (NYSE:USPH) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that USPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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 S&P 500 ETFs by 66 percentage points since March 2017 (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.

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we’re going to take a look at the new hedge fund action encompassing U.S. Physical Therapy, Inc. (NYSE:USPH).

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

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in USPH over the last 21 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of U.S. Physical Therapy, Inc. (NYSE:USPH), with a stake worth $16.3 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $8.4 million. Intrinsic Edge Capital, Citadel Investment Group, and Citadel Investment Group 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 Intrinsic Edge Capital allocated the biggest weight to U.S. Physical Therapy, Inc. (NYSE:USPH), around 0.29% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to USPH.

As aggregate interest increased, some big names have jumped into U.S. Physical Therapy, Inc. (NYSE:USPH) headfirst. Intrinsic Edge Capital, managed by Mark Coe, created the biggest position in U.S. Physical Therapy, Inc. (NYSE:USPH). Intrinsic Edge Capital had $4.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $1.6 million investment in the stock during the quarter. The only other fund with a brand new USPH position is Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as U.S. Physical Therapy, Inc. (NYSE:USPH) but similarly valued. We will take a look at Tennant Company (NYSE:TNC), Stoke Therapeutics, Inc. (NASDAQ:STOK), Arcus Biosciences, Inc. (NYSE:RCUS), Athenex, Inc. (NASDAQ:ATNX), Applied Molecular Transport Inc. (NASDAQ:AMTI), Amerisafe, Inc. (NASDAQ:AMSF), and Upland Software Inc (NASDAQ:UPLD). This group of stocks’ market values resemble USPH’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $38 million in USPH’s case. Arcus Biosciences, Inc. (NYSE:RCUS) is the most popular stock in this table. On the other hand Applied Molecular Transport Inc. (NASDAQ:AMTI) is the least popular one with only 2 bullish hedge fund positions. U.S. Physical Therapy, Inc. (NYSE:USPH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for USPH is 41.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on USPH as the stock returned 30.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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