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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Universal Health Services, Inc. (NYSE:UHS) based on that data and determine whether they were really smart about the stock.
Is Universal Health Services, Inc. (NYSE:UHS) a bargain? Prominent investors were taking a bullish view. The number of bullish hedge fund positions advanced by 8 recently. Universal Health Services, Inc. (NYSE:UHS) was in 38 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that UHS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's review the recent hedge fund action surrounding Universal Health Services, Inc. (NYSE:UHS).
How have hedgies been trading Universal Health Services, Inc. (NYSE:UHS)?
At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UHS over the last 20 quarters. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Universal Health Services, Inc. (NYSE:UHS), with a stake worth $111.3 million reported as of the end of September. Trailing AQR Capital Management was Camber Capital Management, which amassed a stake valued at $92.9 million. Glenview Capital, Woodline Partners, and Renaissance Technologies 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 Solel Partners allocated the biggest weight to Universal Health Services, Inc. (NYSE:UHS), around 8.47% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 5.31 percent of its 13F equity portfolio to UHS.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Universal Health Services, Inc. (NYSE:UHS) headfirst. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, initiated the most valuable position in Universal Health Services, Inc. (NYSE:UHS). Woodline Partners had $23.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $22.9 million position during the quarter. The other funds with brand new UHS positions are Craig Peskin and Peter Fleiss's Solel Partners, Bhagwan Jay Rao's Integral Health Asset Management, and Vishal Saluja and Pham Quang's Endurant Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Universal Health Services, Inc. (NYSE:UHS) but similarly valued. We will take a look at Paylocity Holding Corp (NASDAQ:PCTY), Regency Centers Corp (NYSE:REG), Generac Holdings Inc. (NYSE:GNRC), Elastic N.V. (NYSE:ESTC), Tenaris S.A. (NYSE:TS), Weibo Corp (NASDAQ:WB), and Host Hotels and Resorts Inc (NYSE:HST). This group of stocks' market caps are similar to UHS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCTY,24,476733,-9 REG,15,124124,-3 GNRC,36,473108,7 ESTC,43,1385856,10 TS,12,204534,-3 WB,14,92970,4 HST,29,221044,5 Average,24.7,425481,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $446 million in UHS's case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 12 bullish hedge fund positions. Universal Health Services, Inc. (NYSE:UHS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UHS is 77.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on UHS as the stock returned 18.8% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.