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Is CERN Stock A Buy or Sell?

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We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Cerner Corporation (NASDAQ:CERN) based on that data.

Is CERN stock a buy? Hedge fund interest in Cerner Corporation (NASDAQ:CERN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CERN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Alexandria Real Estate Equities Inc (NYSE:ARE), BeiGene, Ltd. (NASDAQ:BGNE), and Yum China Holdings, Inc. (NYSE:YUMC) to gather more data points.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Jeff Smith
Jeff Smith

Jeffrey Smith of Starboard Value LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 take a glance at the recent hedge fund action regarding Cerner Corporation (NASDAQ:CERN).

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

Heading into the first quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 34 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 substantially (or already accumulated large positions).

More specifically, Generation Investment Management was the largest shareholder of Cerner Corporation (NASDAQ:CERN), with a stake worth $239.3 million reported as of the end of December. Trailing Generation Investment Management was Starboard Value LP, which amassed a stake valued at $179.8 million. Arrowstreet Capital, AQR Capital Management, and Millennium Management 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 Starboard Value LP allocated the biggest weight to Cerner Corporation (NASDAQ:CERN), around 4.57% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, designating 2.78 percent of its 13F equity portfolio to CERN.

Because Cerner Corporation (NASDAQ:CERN) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds who sold off their full holdings by the end of the fourth quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management cut the biggest investment of the 750 funds followed by Insider Monkey, valued at close to $27.7 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) was right behind this move, as the fund dumped about $0.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out 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 Alexandria Real Estate Equities Inc (NYSE:ARE), BeiGene, Ltd. (NASDAQ:BGNE), Yum China Holdings, Inc. (NYSE:YUMC), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Franco-Nevada Corporation (NYSE:FNV), Carnival Corporation & plc (NYSE:CCL), and Fortive Corporation (NYSE:FTV). All of these stocks' market caps are similar to CERN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARE,14,198522,-11 BGNE,21,4659391,8 YUMC,39,1317170,0 TTWO,55,1513003,3 FNV,27,1224140,-4 CCL,47,1196934,10 FTV,33,1116808,-1 Average,33.7,1603710,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $1604 million. That figure was $834 million in CERN's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 14 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 54.3. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately CERN wasn't nearly as popular as these 30 stocks and hedge funds that were betting on CERN were disappointed as the stock returned -7.1% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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