How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Mednax Inc. (NYSE:MD).
Is Mednax Inc. (NYSE:MD) undervalued? The smart money was taking a pessimistic view. The number of long hedge fund positions dropped by 1 in recent months. Mednax Inc. (NYSE:MD) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 33. Our calculations also showed that MD isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the eyes of most shareholders, hedge funds are perceived as underperforming, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Our researchers hone in on the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people direct most of all hedge funds’ total capital, and by keeping track of their highest performing investments, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we’re going to take a peek at the fresh hedge fund action regarding Mednax Inc. (NYSE:MD).
Do Hedge Funds Think MD Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MD over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mednax Inc. (NYSE:MD) was held by Starboard Value LP, which reported holding $137.6 million worth of stock at the end of September. It was followed by P2 Capital Partners with a $66.8 million position. Other investors bullish on the company included Healthcor Management LP, Clearline Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Clearline Capital allocated the biggest weight to Mednax Inc. (NYSE:MD), around 5.82% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, dishing out 5.23 percent of its 13F equity portfolio to MD.
Seeing as Mednax Inc. (NYSE:MD) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies who sold off their entire stakes last quarter. At the top of the heap, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at close to $2.6 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $1.5 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Mednax Inc. (NYSE:MD). We will take a look at SITE Centers Corp. (NYSE:SITC), Chesapeake Utilities Corporation (NYSE:CPK), Tri Continental Corporation (NYSE:TY), GreenTree Hospitality Group Ltd. (NYSE:GHG), Northwest Natural Holding Company (NYSE:NWN), Belden Inc. (NYSE:BDC), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). This group of stocks’ market values are similar to MD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SITC | 14 | 41182 | -1 |
| CPK | 7 | 9195 | -2 |
| TY | 2 | 556 | -1 |
| GHG | 7 | 19299 | 2 |
| NWN | 14 | 18269 | 0 |
| BDC | 16 | 108567 | -3 |
| KLIC | 24 | 200684 | -8 |
| Average | 12 | 56822 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $338 million in MD’s case. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 2 bullish hedge fund positions. Mednax Inc. (NYSE:MD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MD is 69.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MD as the stock returned 37.1% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Pediatrix Medical Group Inc. (NYSE:MD)
Follow Pediatrix Medical Group Inc. (NYSE:MD)
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Disclosure: None. This article was originally published at Insider Monkey.
