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Is ADUS A Good Stock To Buy Now?

Abigail Fisher
·6 min read

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Addus Homecare Corporation (NASDAQ:ADUS) based on those filings.

Is ADUS a good stock to buy now? Addus Homecare Corporation (NASDAQ:ADUS) has seen a decrease in support from the world's most elite money managers lately. Addus Homecare Corporation (NASDAQ:ADUS) was in 17 hedge funds' portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that ADUS 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 today’s marketplace there are dozens of metrics stock market investors put to use to analyze their holdings. A pair of the best metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best investment managers can outperform their index-focused peers by a solid margin (see the details here).

Steven Cohen
Steven Cohen

Steven Cohen of Point72 Asset Management

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 let's check out the recent hedge fund action surrounding Addus Homecare Corporation (NASDAQ:ADUS).

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

At third quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ADUS over the last 21 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Polar Capital was the largest shareholder of Addus Homecare Corporation (NASDAQ:ADUS), with a stake worth $39.4 million reported as of the end of September. Trailing Polar Capital was Columbus Circle Investors, which amassed a stake valued at $12.8 million. Marshall Wace LLP, Renaissance Technologies, and Citadel Investment Group 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 Cruiser Capital Advisors allocated the biggest weight to Addus Homecare Corporation (NASDAQ:ADUS), around 4.13% of its 13F portfolio. Columbus Circle Investors is also relatively very bullish on the stock, designating 0.56 percent of its 13F equity portfolio to ADUS.

Because Addus Homecare Corporation (NASDAQ:ADUS) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there were a few funds that decided to sell off their positions entirely by the end of the third quarter. It's worth mentioning that Israel Englander's Millennium Management dropped the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $4.6 million in stock, and C. Jonathan Gattman's Cloverdale Capital Management was right behind this move, as the fund said goodbye to about $2.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Addus Homecare Corporation (NASDAQ:ADUS) but similarly valued. These stocks are Virtusa Corporation (NASDAQ:VRTU), Kronos Worldwide, Inc. (NYSE:KRO), Vector Group Ltd (NYSE:VGR), Otter Tail Corporation (NASDAQ:OTTR), Cortexyme, Inc. (NASDAQ:CRTX), Yelp Inc (NYSE:YELP), and United Community Banks Inc (NASDAQ:UCBI). This group of stocks' market valuations are similar to ADUS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRTU,28,155153,15 KRO,10,35133,0 VGR,17,131684,-1 OTTR,10,58248,-2 CRTX,7,21069,1 YELP,27,374901,0 UCBI,13,38908,-4 Average,16,116442,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $91 million in ADUS's case. Virtusa Corporation (NASDAQ:VRTU) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 7 bullish hedge fund positions. Addus Homecare Corporation (NASDAQ:ADUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADUS is 48.1. 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 ADUS, though not to the same extent, as the stock returned 9.5% since Q3 (through December 14th) and outperformed the market as well.

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

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