Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cerner Corporation (NASDAQ:CERN).
Is Cerner Corporation (NASDAQ:CERN) a safe investment right now? The best stock pickers are becoming less confident. The number of long hedge fund bets fell by 4 recently. Our calculations also showed that CERN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are several gauges investors can use to grade their stock investments. Two of the less utilized gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outpace the broader indices by a healthy amount (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a peek at the recent hedge fund action surrounding Cerner Corporation (NASDAQ:CERN).
What does smart money think about Cerner Corporation (NASDAQ:CERN)?
At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in CERN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of Cerner Corporation (NASDAQ:CERN), with a stake worth $329.5 million reported as of the end of September. Trailing Generation Investment Management was Starboard Value LP, which amassed a stake valued at $258.7 million. Arrowstreet Capital, Samlyn Capital, and D E Shaw 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 7.49% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, designating 6.03 percent of its 13F equity portfolio to CERN.
Judging by the fact that Cerner Corporation (NASDAQ:CERN) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that slashed their entire stakes heading into Q4. At the top of the heap, Michael Lowenstein's Kensico Capital dumped the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $68.2 million in stock. Greg Poole's fund, Echo Street Capital Management, also dumped its stock, about $25.4 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.
Let's now review 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 Fiat Chrysler Automobiles NV (NYSE:FCAU), Match Group, Inc. (NASDAQ:MTCH), Twenty-First Century Fox Inc (NASDAQ:FOXA), and Snap Inc. (NYSE:SNAP). All of these stocks' market caps match CERN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCAU,23,970651,-5 MTCH,32,1073084,-12 FOXA,37,2451723,-14 SNAP,66,2388937,12 Average,39.5,1721099,-4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1721 million. That figure was $1123 million in CERN's case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Fiat Chrysler Automobiles NV (NYSE:FCAU) is the least popular one with only 23 bullish hedge fund positions. Cerner Corporation (NASDAQ:CERN) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on CERN as the stock returned -6.9% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.