Select Medical Holdings Corporation (SEM): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Is Select Medical Holdings Corporation (NYSE:SEM) a healthy stock for your portfolio? Money managers are taking an optimistic view. The number of bullish hedge fund positions advanced by 9 recently.

If you’d ask most investors, hedge funds are perceived as slow, outdated investment vehicles of the past. While there are over 8000 funds with their doors open today, we look at the moguls of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total capital, and by monitoring their top investments, we have come up with a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as beneficial, bullish insider trading sentiment is another way to break down the stock market universe. Just as you’d expect, there are plenty of motivations for an executive to get rid of shares of his or her company, but just one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this tactic if you know what to do (learn more here).

Consequently, it’s important to take a glance at the latest action encompassing Select Medical Holdings Corporation (NYSE:SEM).

What does the smart money think about Select Medical Holdings Corporation (NYSE:SEM)?

At the end of the first quarter, a total of 21 of the hedge funds we track were bullish in this stock, a change of 75% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly.

Of the funds we track, Ken Griffin’s Citadel Investment Group had the largest position in Select Medical Holdings Corporation (NYSE:SEM), worth close to $9.7 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by David Dreman of Dreman Value Management, with a $9.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Chuck Royce’s Royce & Associates, Timothy S. Peterson’s Regiment Capital and Cliff Asness’s AQR Capital Management.

Now, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Select Medical Holdings Corporation (NYSE:SEM). Citadel Investment Group had 9.7 million invested in the company at the end of the quarter. David Dreman’s Dreman Value Management also made a $9.2 million investment in the stock during the quarter. The other funds with brand new SEM positions are Timothy S. Peterson’s Regiment Capital, Glenn Russell Dubin’s Highbridge Capital Management, and D. E. Shaw’s D E Shaw.

How have insiders been trading Select Medical Holdings Corporation (NYSE:SEM)?

Bullish insider trading is at its handiest when the company in question has seen transactions within the past 180 days. Over the last half-year time period, Select Medical Holdings Corporation (NYSE:SEM) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Select Medical Holdings Corporation (NYSE:SEM). These stocks are Community Health Systems (NYSE:CYH), Health Management Associates Inc (NYSE:HMA), LifePoint Hospitals, Inc. (NASDAQ:LPNT), Amsurg Corp (NASDAQ:AMSG), and Vanguard Health Systems, Inc. (NYSE:VHS). This group of stocks belong to the hospitals industry and their market caps are similar to SEM’s market cap.

With the returns exhibited by our tactics, everyday investors must always pay attention to hedge fund and insider trading activity, and Select Medical Holdings Corporation (NYSE:SEM) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds