This Metric Says You Are Smart to Sell Chemed Corporation (CHE)

Chemed Corporation (NYSE:CHE) investors should be aware of a decrease in hedge fund interest in recent months.

In the eyes of most stock holders, hedge funds are viewed as slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open today, we choose to focus on the bigwigs of this club, around 450 funds. It is estimated that this group controls the lion’s share of the smart money’s total asset base, and by watching their highest performing investments, we have formulated a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as key, positive insider trading activity is a second way to parse down the stock market universe. As the old adage goes: there are lots of stimuli for a corporate insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Several empirical studies have demonstrated the valuable potential of this method if piggybackers know where to look (learn more here).

Now, let’s take a peek at the recent action surrounding Chemed Corporation (NYSE:CHE).

How are hedge funds trading Chemed Corporation (NYSE:CHE)?

At Q1’s end, a total of 8 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully.

According to our comprehensive database, Chuck Royce’s Royce & Associates had the most valuable position in Chemed Corporation (NYSE:CHE), worth close to $113.8 million, comprising 0.3% of its total 13F portfolio. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $62.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Cliff Asness’s AQR Capital Management, Joel Greenblatt’s Gotham Asset Management and Jim Simons’s Renaissance Technologies.

Because Chemed Corporation (NYSE:CHE) has faced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely in Q1. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the largest stake of all the hedgies we monitor, worth close to $0.4 million in stock., and Peter Algert and Kevin Coldiron of Algert Coldiron Investors was right behind this move, as the fund said goodbye to about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Chemed Corporation (NYSE:CHE)?

Bullish insider trading is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the last 180-day time frame, Chemed Corporation (NYSE:CHE) has experienced zero unique insiders purchasing, and 7 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Chemed Corporation (NYSE:CHE). These stocks are Addus Homecare Corporation (NASDAQ:ADUS), Almost Family, Inc. (NASDAQ:AFAM), Gentiva Health Services, Inc. (NASDAQ:GTIV), Amedisys Inc (NASDAQ:AMED), and LHC Group, Inc. (NASDAQ:LHCG). This group of stocks are the members of the home health care industry and their market caps are similar to CHE’s market cap.

With the returns shown by our strategies, everyday investors should always keep an eye on hedge fund and insider trading sentiment, and Chemed Corporation (NYSE:CHE) is an important part of this process.

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