Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) makes for a good investment right now.
Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2019. MDRX has seen an increase in enthusiasm from smart money lately. There were 20 hedge funds in our database with MDRX positions at the end of the previous quarter. Our calculations also showed that MDRX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Johnston of Steelhead Partners
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the fresh hedge fund action surrounding Allscripts Healthcare Solutions Inc (NASDAQ:MDRX).
How have hedgies been trading Allscripts Healthcare Solutions Inc (NASDAQ:MDRX)?
Heading into the first quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 55% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MDRX 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.
The largest stake in Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) was held by Fisher Asset Management, which reported holding $52 million worth of stock at the end of September. It was followed by D E Shaw with a $37.2 million position. Other investors bullish on the company included Tamarack Capital Management, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), around 8.03% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, dishing out 1.39 percent of its 13F equity portfolio to MDRX.
As one would reasonably expect, some big names have been driving this bullishness. Endurant Capital Management, managed by Vishal Saluja and Pham Quang, established the most outsized position in Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). Endurant Capital Management had $4.4 million invested in the company at the end of the quarter. Michael Johnston’s Steelhead Partners also initiated a $1.7 million position during the quarter. The other funds with brand new MDRX positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Daniel S. Och’s OZ Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) but similarly valued. We will take a look at Calavo Growers, Inc. (NASDAQ:CVGW), Uniti Group Inc. (NASDAQ:UNIT), Akcea Therapeutics, Inc. (NASDAQ:AKCA), and TTM Technologies, Inc. (NASDAQ:TTMI). All of these stocks’ market caps resemble MDRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVGW | 23 | 155923 | 3 |
| UNIT | 15 | 157740 | -9 |
| AKCA | 10 | 17000 | 5 |
| TTMI | 11 | 30761 | -1 |
| Average | 14.75 | 90356 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $210 million in MDRX’s case. Calavo Growers, Inc. (NASDAQ:CVGW) is the most popular stock in this table. On the other hand Akcea Therapeutics, Inc. (NASDAQ:AKCA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately MDRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MDRX were disappointed as the stock returned -32.3% during the three months of 2020 (through April 6th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
