Should I Avoid Stryker Corporation (SYK)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Stryker Corporation (NYSE:SYK).

Stryker Corporation (NYSE:SYK) was in 46 hedge funds’ portfolios at the end of September. The all time high for this statistic is 50. SYK has seen a decrease in hedge fund interest in recent months. There were 48 hedge funds in our database with SYK holdings at the end of June. Our calculations also showed that SYK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to view the key hedge fund action encompassing Stryker Corporation (NYSE:SYK).

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

Heading into the fourth quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SYK over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Fundsmith LLP was the largest shareholder of Stryker Corporation (NYSE:SYK), with a stake worth $1850.1 million reported as of the end of September. Trailing Fundsmith LLP was Fisher Asset Management, which amassed a stake valued at $784.8 million. Bridgewater Associates, Adage Capital Management, and OrbiMed Advisors 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 Fundsmith LLP allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 5.12% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, earmarking 4.09 percent of its 13F equity portfolio to SYK.

Due to the fact that Stryker Corporation (NYSE:SYK) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who were dropping their entire stakes last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $36.3 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $6.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 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. These stocks are Atlassian Corporation Plc (NASDAQ:TEAM), Booking Holdings Inc. (NASDAQ:BKNG), GlaxoSmithKline plc (NYSE:GSK), Lockheed Martin Corporation (NYSE:LMT), Infosys Limited (NYSE:INFY), Prologis Inc (NYSE:PLD), and Zoetis Inc (NYSE:ZTS). All of these stocks’ market caps resemble SYK’s market cap.

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As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $3303 million. That figure was $3365 million in SYK’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 29 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SYK is 43.3. 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 negative signal and 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately SYK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SYK investors were disappointed as the stock returned -10.3% since the end of September (through 11/30) 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 most of these stocks already outperformed the market in 2021.

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

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