Where Do Hedge Funds Stand On NantHealth, Inc. (NH)?

In this article we are going to use hedge fund sentiment as a tool and determine whether NantHealth, Inc. (NASDAQ:NH) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is NantHealth, Inc. (NASDAQ:NH) a buy, sell, or hold? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets dropped by 3 in recent months. NantHealth, Inc. (NASDAQ:NH) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. Our calculations also showed that NH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 6 hedge funds in our database with NH positions at the end of the fourth quarter.

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 115 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.

Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 take a peek at the key hedge fund action surrounding NantHealth, Inc. (NASDAQ:NH).

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

At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the fourth quarter of 2020. On the other hand, there were a total of 4 hedge funds with a bullish position in NH a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in NantHealth, Inc. (NASDAQ:NH), which was worth $0.2 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $0.2 million worth of shares. Engineers Gate Manager was 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 Engineers Gate Manager allocated the biggest weight to NantHealth, Inc. (NASDAQ:NH), around 0.01% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, setting aside 0.0003 percent of its 13F equity portfolio to NH.

Judging by the fact that NantHealth, Inc. (NASDAQ:NH) has faced falling interest from the entirety of the hedge funds we track, we can see that there were a few money managers that elected to cut their positions entirely last quarter. At the top of the heap, Renaissance Technologies sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $0.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to NantHealth, Inc. (NASDAQ:NH). These stocks are Oncorus, Inc. (NASDAQ:ONCR), Team, Inc. (NYSE:TISI), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), América Móvil, S.A.B. de C.V. (NYSE:AMOV), Primis Financial Corp. (NASDAQ:FRST), Experience Investment Corp. (NASDAQ:EXPC), and American Outdoor Brands, Inc. (NASDAQ:AOUT). This group of stocks’ market caps are closest to NH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $0 million in NH’s case. American Outdoor Brands, Inc. (NASDAQ:AOUT) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. NantHealth, Inc. (NASDAQ:NH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NH is 21.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately NH wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NH investors were disappointed as the stock returned -15.3% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.

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