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With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Cerner Corporation (NASDAQ:CERN).
Is CERN stock a buy here? Cerner Corporation (NASDAQ:CERN) was in 40 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 41. CERN investors should be aware of an increase in enthusiasm from smart money lately. There were 34 hedge funds in our database with CERN holdings at the end of December. Our calculations also showed that CERN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover 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 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. Now let's take a gander at the recent hedge fund action regarding Cerner Corporation (NASDAQ:CERN).
Do Hedge Funds Think CERN Is A Good Stock To Buy Now?
At Q1's end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in CERN a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Cerner Corporation (NASDAQ:CERN) was held by Arrowstreet Capital, which reported holding $191.3 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $167.2 million position. Other investors bullish on the company included Starboard Value LP, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to Cerner Corporation (NASDAQ:CERN), around 3.46% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, earmarking 3.04 percent of its 13F equity portfolio to CERN.
Consequently, some big names were breaking ground themselves. Renaissance Technologies, created the most valuable position in Cerner Corporation (NASDAQ:CERN). Renaissance Technologies had $138.9 million invested in the company at the end of the quarter. Seth Rosen's Nitorum Capital also made a $37.6 million investment in the stock during the quarter. The other funds with brand new CERN positions are Steve Cohen's Point72 Asset Management, Christopher James's Partner Fund Management, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cerner Corporation (NASDAQ:CERN) but similarly valued. We will take a look at POSCO (NYSE:PKX), Splunk Inc (NASDAQ:SPLK), Northern Trust Corporation (NASDAQ:NTRS), Royal Caribbean Cruises Ltd. (NYSE:RCL), Hess Corporation (NYSE:HES), Cloudflare, Inc. (NYSE:NET), and Fresenius Medical Care AG & Co. (NYSE:FMS). This group of stocks' market values resemble CERN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKX,12,157036,2 SPLK,41,934345,-6 NTRS,28,348449,-3 RCL,42,594423,5 HES,26,556388,-7 NET,45,792469,-15 FMS,12,10933,3 Average,29.4,484863,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $485 million. That figure was $1135 million in CERN's case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 12 bullish hedge fund positions. Cerner Corporation (NASDAQ:CERN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CERN is 81.7. 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 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on CERN, though not to the same extent, as the stock returned 9.8% since Q1 (through June 25th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.