Were Hedge Funds Right About Piling Into Bausch Health Companies Inc. (BHC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Bausch Health Companies Inc. (NYSE:BHC) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Bausch Health Companies Inc. (NYSE:BHC) was in 43 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BHC has experienced an increase in hedge fund interest recently. There were 40 hedge funds in our database with BHC positions at the end of the third quarter. Our calculations also showed that BHC isn’t among the 30 most popular stocks among hedge funds (click for Q4 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Jeffrey Ubben of ValueAct Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to analyze the latest hedge fund action encompassing Bausch Health Companies Inc. (NYSE:BHC).

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

At the end of the fourth quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in BHC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Paulson’s Paulson & Co has the largest position in Bausch Health Companies Inc. (NYSE:BHC), worth close to $537.5 million, accounting for 14% of its total 13F portfolio. The second most bullish fund manager is ValueAct Capital, led by Jeffrey Ubben, holding a $373.2 million position; 4.3% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass Larry Robbins’s Glenview Capital, Steven Tananbaum’s GoldenTree Asset Management and Alex Duran and Scott Hendrickson’s Permian Investment Partners. In terms of the portfolio weights assigned to each position Chou Associates Management allocated the biggest weight to Bausch Health Companies Inc. (NYSE:BHC), around 23.52% of its 13F portfolio. Permian Investment Partners is also relatively very bullish on the stock, designating 17.78 percent of its 13F equity portfolio to BHC.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Icahn Capital LP, managed by Carl Icahn, established the largest position in Bausch Health Companies Inc. (NYSE:BHC). Icahn Capital LP had $104.7 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $8.1 million investment in the stock during the quarter. The other funds with brand new BHC positions are Wayne Cooperman’s Cobalt Capital Management, Dan Rasmussen’s Verdad Advisers, and Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management.

Let’s check out hedge fund activity in other stocks similar to Bausch Health Companies Inc. (NYSE:BHC). We will take a look at US Foods Holding Corp. (NYSE:USFD), Arrow Electronics, Inc. (NYSE:ARW), Allakos Inc. (NASDAQ:ALLK), argenx SE (NASDAQ:ARGX), UGI Corp (NYSE:UGI), Under Armour Inc (NYSE:UA), and Pan American Silver Corp. (NASDAQ:PAAS). This group of stocks’ market valuations are closest to BHC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $861 million. That figure was $2466 million in BHC’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 11 bullish hedge fund positions. Bausch Health Companies Inc. (NYSE:BHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BHC is 82.4. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on BHC as the stock returned 54.7% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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