Is Cerner Corporation (NASDAQ:CERN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Cerner Corporation (NASDAQ:CERN) a sound investment today? The smart money was getting less bullish. The number of long hedge fund positions went down by 2 in recent months. Cerner Corporation (NASDAQ:CERN) was in 38 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 41. Our calculations also showed that CERN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 40 hedge funds in our database with CERN holdings at the end of March.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Smith of Starboard Value LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Cerner Corporation (NASDAQ:CERN).
Do Hedge Funds Think CERN Is A Good Stock To Buy Now?
At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in CERN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cerner Corporation (NASDAQ:CERN) was held by Starboard Value LP, which reported holding $248.6 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $196.6 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Nitorum Capital. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Cerner Corporation (NASDAQ:CERN), around 5.98% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, earmarking 4.88 percent of its 13F equity portfolio to CERN.
Because Cerner Corporation (NASDAQ:CERN) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of funds that elected to cut their full holdings by the end of the second quarter. Intriguingly, Christopher James’s Partner Fund Management sold off the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $10 million in stock. Bryan Hinmon’s fund, Motley Fool Asset Management, also dumped its stock, about $7.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cerner Corporation (NASDAQ:CERN) but similarly valued. We will take a look at United Microelectronics Corp (NYSE:UMC), POSCO (NYSE:PKX), Vulcan Materials Company (NYSE:VMC), United Rentals, Inc. (NYSE:URI), Dollar Tree, Inc. (NASDAQ:DLTR), NovoCure Limited (NASDAQ:NVCR), and W.W. Grainger, Inc. (NYSE:GWW). This group of stocks’ market caps are similar to CERN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMC | 10 | 141218 | -1 |
| PKX | 12 | 161569 | 0 |
| VMC | 43 | 1374916 | -5 |
| URI | 47 | 1173038 | 6 |
| DLTR | 42 | 1379674 | 1 |
| NVCR | 25 | 500806 | 3 |
| GWW | 29 | 221218 | -1 |
| Average | 29.7 | 707491 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $707 million. That figure was $1395 million in CERN’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 10 bullish hedge fund positions. Cerner Corporation (NASDAQ:CERN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CERN is 68.6. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately CERN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CERN were disappointed as the stock returned -9.4% since the end of June (through 10/11) 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 Cerner Corp (NASDAQ:CERN)
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Disclosure: None. This article was originally published at Insider Monkey.
