Molina Healthcare, Inc. (MOH): Are Hedge Funds Right About This Stock?

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Molina Healthcare, Inc. (NYSE:MOH) changed recently.

Is Molina Healthcare, Inc. (NYSE:MOH) a good investment right now? Investors who are in the know are in a bullish mood. The number of long hedge fund bets inched up by 2 recently. At the end of this article, we will also compare Molina Healthcare, Inc. (NYSE:MOH) to other stocks, including AmeriGas Partners, L.P. (NYSE:APU), Burlington Stores Inc (NYSE:BURL), and Booz Allen Hamilton Holding Corporation (NYSE:BAH) to get a better sense of its popularity.

In today’s marketplace, there are plenty of signals shareholders can use to analyze their holdings. Two of the less known signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce their index-focused peers by a significant amount (see the details here).

With all of this in mind, we’re going to take a look at the new action surrounding Molina Healthcare, Inc. (NYSE:MOH).

What does the smart money think about Molina Healthcare, Inc. (NYSE:MOH)?

Heading into Q4, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 7% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the largest position in Molina Healthcare, Inc. (NYSE:MOH), worth close to $222.8 million, accounting for 2.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $74.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Clifford Fox’s Columbus Circle Investors, Christopher James’s Partner Fund Management, and Glenn Russell Dubin’s Highbridge Capital Management.

As one would reasonably expect, key hedge funds were breaking ground themselves. Hutchin Hill Capital, managed by Neil Chriss, established the most valuable position in Molina Healthcare, Inc. (NYSE:MOH). Hutchin Hill Capital had $6.5 million invested in the company at the end of the quarter. Richard Driehaus’ Driehaus Capital also initiated a $1.8 million position during the quarter. The following funds were also among the new Molina Healthcare, Inc. (NYSE:MOH) investors: George Hall’s Clinton Group, Andy Redleaf’s Whitebox Advisors, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Molina Healthcare, Inc. (NYSE:MOH) but similarly valued. These stocks are AmeriGas Partners, L.P. (NYSE:APU), Burlington Stores Inc (NYSE:BURL), Booz Allen Hamilton Holding Corporation (NYSE:BAH), and Senior Housing Properties Trust (NYSE:SNH). This group of stocks’ market values resembles Molina Healthcare, Inc. (NYSE:MOH)’s market value.

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 $248 million. That figure was $444 million in Molina Healthcare, Inc. (NYSE:MOH)’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand, AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 8 bullish hedge fund positions. Molina Healthcare, Inc. (NYSE:MOH) 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. In this regard, Burlington Stores Inc (NYSE:BURL) might be a better candidate to consider a long position.