Stryker Corporation (SYK): Are Hedge Funds Right About This Stock?

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Stryker Corporation (NYSE:SYK) in this article.

Stryker Corporation (NYSE:SYK) was in 26 hedge funds’ portfolios at the end of the third quarter of 2015. Stryker Corporation (NYSE:SYK) has experienced a decrease in activity from the world’s largest hedge funds of late. There were 37 hedge funds in our database with Stryker Corporation (NYSE:SYK) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), The Kroger Co. (NYSE:KR), and Bank of Montreal (USA) (NYSE:BMO) to gather more data points.

To the average investor, there are tons of gauges shareholders have at their disposal to grade publicly traded companies. A couple of the less known gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the market by a very impressive amount (see the details here).

With all of this in mind, let’s analyze the key action encompassing Stryker Corporation (NYSE:SYK).

What have hedge funds been doing with Stryker Corporation (NYSE:SYK)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 30% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Donald Yacktman’s Yacktman Asset Management has the biggest position in Stryker Corporation (NYSE:SYK), worth close to $295.8 million, comprising 1.9% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $173.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Anand Parekh’s Alyeska Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management, and Cliff Asness’ AQR Capital Management.

Seeing as Stryker Corporation (NYSE:SYK) has experienced a declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Eric Mindich’s Eton Park Capital dumped the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $37.2 million in stock. Zach Schreiber’s fund, Point State Capital, also cut its stock, about $33.5 million worth of shares. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 11 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Stryker Corporation (NYSE:SYK). We will take a look at Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), The Kroger Co. (NYSE:KR), Bank of Montreal (USA) (NYSE:BMO), and CIGNA Corporation (NYSE:CI). All of these stocks’ market caps match Stryker Corporation (NYSE:SYK)’s market cap.

As you can see, these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1.78 billion. That figure was $883 million in Stryker Corporation (NYSE:SYK)’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand, Bank of Montreal (USA) (NYSE:BMO) is the least popular one with only 17 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, CIGNA Corporation (NYSE:CI) might be a better candidate to consider a long position.