In this article you are going to find out whether hedge funds think Tenet Healthcare Corp (NYSE:THC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Tenet Healthcare Corp (NYSE:THC) has seen an increase in support from the world’s most elite money managers recently. THC was in 35 hedge funds’ portfolios at the end of the first quarter of 2020. There were 34 hedge funds in our database with THC holdings at the end of the previous quarter. Our calculations also showed that THC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Larry Robbins of Glenview Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action surrounding Tenet Healthcare Corp (NYSE:THC).
What does smart money think about Tenet Healthcare Corp (NYSE:THC)?
At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in THC over the last 18 quarters. So, let’s review 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, Larry Robbins’s Glenview Capital has the most valuable position in Tenet Healthcare Corp (NYSE:THC), worth close to $284.2 million, corresponding to 7.7% of its total 13F portfolio. Sitting at the No. 2 spot is Camber Capital Management, managed by Stephen DuBois, which holds a $50.4 million position; 3% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism include Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management and Jared Nussbaum’s Nut Tree Capital. In terms of the portfolio weights assigned to each position Mudrick Capital Management allocated the biggest weight to Tenet Healthcare Corp (NYSE:THC), around 10.98% of its 13F portfolio. Nut Tree Capital is also relatively very bullish on the stock, dishing out 10.66 percent of its 13F equity portfolio to THC.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Mudrick Capital Management, managed by Jason Mudrick, initiated the largest position in Tenet Healthcare Corp (NYSE:THC). Mudrick Capital Management had $9 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Lee Ainslie’s Maverick Capital, Greg Eisner’s Engineers Gate Manager, and Yi Xin’s Ariose Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Tenet Healthcare Corp (NYSE:THC). We will take a look at American Assets Trust, Inc (NYSE:AAT), SAGE Therapeutics Inc (NASDAQ:SAGE), PQ Group Holdings Inc. (NYSE:PQG), and Trustmark Corp (NASDAQ:TRMK). This group of stocks’ market values match THC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAT | 15 | 33326 | 0 |
| SAGE | 30 | 257910 | -5 |
| PQG | 7 | 36427 | 3 |
| TRMK | 13 | 11558 | -3 |
| Average | 16.25 | 84805 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $490 million in THC’s case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Tenet Healthcare Corp (NYSE:THC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on THC as the stock returned 51.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
