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Hedge Fund Sentiment Is Stagnant On HCA Healthcare Inc (HCA)

Reymerlyn Martin

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards HCA Healthcare Inc (NYSE:HCA).

Hedge fund interest in HCA Healthcare Inc (NYSE:HCA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EPD isn't among the 30 most popular stocks among hedge funds (see the video below). At the end of this article we will also compare HCA to other stocks including UBS Group AG (NYSE:UBS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Honda Motor Co Ltd (NYSE:HMC) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the eyes of most stock holders, hedge funds are perceived as underperforming, old investment vehicles of the past. While there are greater than 8000 funds trading today, Our experts look at the elite of this club, approximately 750 funds. These hedge fund managers orchestrate most of all hedge funds' total asset base, and by shadowing their best investments, Insider Monkey has found a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

GLENVIEW CAPITAL

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the recent hedge fund action encompassing HCA Healthcare Inc (NYSE:HCA).

What does smart money think about HCA Healthcare Inc (NYSE:HCA)?

At the end of the second quarter, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in HCA a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

HCA_oct2019

The largest stake in HCA Healthcare Inc (NYSE:HCA) was held by Glenview Capital, which reported holding $682.3 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $466.5 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Point72 Asset Management.

Seeing as HCA Healthcare Inc (NYSE:HCA) has experienced falling interest from hedge fund managers, it's easy to see that there were a few hedge funds that elected to cut their full holdings by the end of the second quarter. Intriguingly, Brian Ashford-Russell and Tim Woolley's Polar Capital dumped the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $49.7 million in stock. David Costen Haley's fund, HBK Investments, also dropped its stock, about $15.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to HCA Healthcare Inc (NYSE:HCA). We will take a look at UBS Group AG (NYSE:UBS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Honda Motor Co Ltd (NYSE:HMC), and Biogen Inc. (NASDAQ:BIIB). This group of stocks' market valuations are closest to HCA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBS,14,796197,3 VRTX,40,2385510,-5 HMC,7,83951,-2 BIIB,43,3521939,-6 Average,26,1696899,-2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1697 million. That figure was $3049 million in HCA's case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks HCA Healthcare Inc (NYSE:HCA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HCA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HCA were disappointed as the stock returned -10.6% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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