Is Chemed Corporation (NYSE:CHE) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. 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.
Chemed Corporation (NYSE:CHE) was in 21 hedge funds' portfolios at the end of March. CHE shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 24 hedge funds in our database with CHE positions at the end of the previous quarter. Our calculations also showed that che isn't among the 30 most popular stocks among hedge funds.
In the eyes of most traders, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the moguls of this group, approximately 750 funds. Most estimates calculate that this group of people administer most of the hedge fund industry's total capital, and by tailing their first-class stock picks, Insider Monkey has formulated many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let's review the latest hedge fund action surrounding Chemed Corporation (NYSE:CHE).
How have hedgies been trading Chemed Corporation (NYSE:CHE)?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in CHE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Chemed Corporation (NYSE:CHE), which was worth $135.2 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $86.4 million worth of shares. Moreover, GAMCO Investors, GLG Partners, and Point72 Asset Management were also bullish on Chemed Corporation (NYSE:CHE), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Chemed Corporation (NYSE:CHE) has witnessed bearish sentiment from the smart money, it's safe to say that there was a specific group of money managers that elected to cut their entire stakes heading into Q3. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $3.7 million in stock, and Ronald Hua's Qtron Investments was right behind this move, as the fund cut about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds heading into Q3.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Chemed Corporation (NYSE:CHE) but similarly valued. We will take a look at Semiconductor Manufacturing International Corporation (NYSE:SMI), Pegasystems Inc. (NASDAQ:PEGA), Penumbra Inc (NYSE:PEN), and Murphy Oil Corporation (NYSE:MUR). All of these stocks' market caps match CHE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMI,4,8945,0 PEGA,25,703081,6 PEN,20,253745,2 MUR,20,324847,2 Average,17.25,322655,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $323 million. That figure was $416 million in CHE's case. Pegasystems Inc. (NASDAQ:PEGA) is the most popular stock in this table. On the other hand Semiconductor Manufacturing International Corporation (NYSE:SMI) is the least popular one with only 4 bullish hedge fund positions. Chemed Corporation (NYSE:CHE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on CHE as the stock returned 3.6% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.