Were Expert Investors Right About Universal Health Services, Inc. (UHS)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Universal Health Services, Inc. (NYSE:UHS) and determine whether hedge funds skillfully traded this stock.

Is Universal Health Services, Inc. (NYSE:UHS) a marvelous investment right now? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund bets moved up by 2 in recent months. Universal Health Services, Inc. (NYSE:UHS) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. Our calculations also showed that UHS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Larry Robbins of Glenview Capital

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 let’s take a peek at the new hedge fund action encompassing Universal Health Services, Inc. (NYSE:UHS).

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

At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in UHS a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Camber Capital Management held the most valuable stake in Universal Health Services, Inc. (NYSE:UHS), which was worth $200.6 million at the end of the third quarter. On the second spot was Glenview Capital which amassed $121.6 million worth of shares. Partner Fund Management, Arrowstreet Capital, and Healthcor Management LP 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 Solel Partners allocated the biggest weight to Universal Health Services, Inc. (NYSE:UHS), around 9.42% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 6.18 percent of its 13F equity portfolio to UHS.

With a general bullishness amongst the heavyweights, key money managers have jumped into Universal Health Services, Inc. (NYSE:UHS) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most outsized position in Universal Health Services, Inc. (NYSE:UHS). Point72 Asset Management had $17.5 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also initiated a $14.8 million position during the quarter. The following funds were also among the new UHS investors: Dmitry Balyasny’s Balyasny Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Universal Health Services, Inc. (NYSE:UHS) but similarly valued. These stocks are Axovant Sciences Ltd (NYSE:AXON), Lamar Advertising Company (NASDAQ:LAMR), Natura &Co Holding S.A. (NYSE:NTCO), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Regency Centers Corp (NYSE:REG), Cna Financial Corporation (NYSE:CNA), and Penn National Gaming, Inc (NASDAQ:PENN). All of these stocks’ market caps resemble UHS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $751 million in UHS’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Universal Health Services, Inc. (NYSE:UHS) is more popular among hedge funds. Our overall hedge fund sentiment score for UHS is 86.3. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, UHS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UHS were disappointed as the stock returned -5.9% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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

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