In this article you are going to find out whether hedge funds think Amedisys Inc (NASDAQ:AMED) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Amedisys Inc (NASDAQ:AMED) an excellent investment today? Prominent investors are in a pessimistic mood. The number of long hedge fund positions were trimmed by 2 in recent months. Our calculations also showed that AMED isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a peek at the latest hedge fund action surrounding Amedisys Inc (NASDAQ:AMED).
How are hedge funds trading Amedisys Inc (NASDAQ:AMED)?
Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in AMED a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Amedisys Inc (NASDAQ:AMED), which was worth $82.2 million at the end of the third quarter. On the second spot was Redmile Group which amassed $32.6 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and GLG Partners 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 Miura Global Management allocated the biggest weight to Amedisys Inc (NASDAQ:AMED), around 1.43% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to AMED.
Since Amedisys Inc (NASDAQ:AMED) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there exists a select few hedge funds that slashed their positions entirely last quarter. It's worth mentioning that Bhagwan Jay Rao's Integral Health Asset Management dropped the largest investment of the 750 funds watched by Insider Monkey, worth about $10.9 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dropped about $5.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Amedisys Inc (NASDAQ:AMED) but similarly valued. We will take a look at The Stars Group Inc. (NASDAQ:TSG), TIM Participacoes SA (NYSE:TSU), CF Industries Holdings, Inc. (NYSE:CF), and Reliance Steel & Aluminum Co. (NYSE:RS). All of these stocks' market caps are similar to AMED's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSG,34,1097115,-11 TSU,11,154487,0 CF,34,606091,-7 RS,23,211117,-11 Average,25.5,517203,-7.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $517 million. That figure was $244 million in AMED's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 11 bullish hedge fund positions. Amedisys Inc (NASDAQ:AMED) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately AMED wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AMED investors were disappointed as the stock returned -2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.