Should You Avoid Mednax Inc. (MD)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in MEDNAX Inc. (NYSE:MD)? The smart money sentiment can provide an answer to this question.

MEDNAX Inc. (NYSE:MD) was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. MD has seen a decrease in hedge fund sentiment recently. There were 14 hedge funds in our database with MD positions at the end of the previous quarter. At the end of this article we will also compare MD to other stocks including EQT Midstream Partners LP (NYSE:EQM), PerkinElmer, Inc. (NYSE:PKI), and Braskem SA (ADR) (NYSE:BAK) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a look at the recent action surrounding MEDNAX Inc. (NYSE:MD).

Hedge fund activity in MEDNAX Inc. (NYSE:MD)

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, down 14% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in MD over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mitchell Blutt’s Consonance Capital Management has the most valuable position in MEDNAX Inc. (NYSE:MD), worth close to $43.7 million, comprising 4.2% of its total 13F portfolio. The second most bullish fund manager is Clifton S. Robbins of Blue Harbour Group, with a $36.1 million position; 1.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Greg Poole’s Echo Street Capital Management, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Jim Simons’ Renaissance Technologies, one of the largest hedge funds in the world, said goodbye to the biggest position of all the investors watched by Insider Monkey, valued at about $18.3 million in MEDNAX Inc. (NYSE:MD) stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund said goodbye to about $14.1 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to MEDNAX Inc. (NYSE:MD). These stocks are EQT Midstream Partners LP (NYSE:EQM), PerkinElmer, Inc. (NYSE:PKI), Braskem SA (ADR) (NYSE:BAK), and Owens Corning (NYSE:OC). All of these stocks’ market caps match MD’s market cap.

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 $437 million. That figure was $123 million in MD’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand EQT Midstream Partners LP (NYSE:EQM) is the least popular one with only 8 bullish hedge fund positions. MEDNAX Inc. (NYSE:MD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OC might be a better candidate to consider taking a long position in.

Disclosure: none.