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Last year we predicted the arrival of the first US recession since 2009 and we told in advance 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 Mednax Inc. (NYSE:MD).
Is Mednax Inc. (NYSE:MD) a buy right now? Money managers were in an optimistic mood. The number of bullish hedge fund positions moved up by 8 lately. Mednax Inc. (NYSE:MD) was in 19 hedge funds' portfolios at the end of June. The all time high for this statistic is 33. Our calculations also showed that MD isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 11 hedge funds in our database with MD positions at the end of the first quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Peter Rathjens of Arrowstreet Capital
Now we're going to take a peek at the recent hedge fund action surrounding Mednax Inc. (NYSE:MD).
Do Hedge Funds Think MD Is A Good Stock To Buy Now?
At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 73% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MD over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Starboard Value LP, managed by Jeffrey Smith, holds the biggest position in Mednax Inc. (NYSE:MD). Starboard Value LP has a $254.8 million position in the stock, comprising 5% of its 13F portfolio. On Starboard Value LP's heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $27.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain D. E. Shaw's D E Shaw, Kenneth Squire's 13D Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to Mednax Inc. (NYSE:MD), around 5% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 3.3 percent of its 13F equity portfolio to MD.
As aggregate interest increased, specific money managers were breaking ground themselves. Renaissance Technologies, assembled the most outsized position in Mednax Inc. (NYSE:MD). Renaissance Technologies had $9.4 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also initiated a $2.5 million position during the quarter. The following funds were also among the new MD investors: Israel Englander's Millennium Management, Lee Ainslie's Maverick Capital, and Greg Eisner's Engineers Gate Manager.
Let's now take a look at hedge fund activity in other stocks similar to Mednax Inc. (NYSE:MD). We will take a look at Prestige Consumer Healthcare Inc. (NYSE:PBH), Barnes Group Inc. (NYSE:B), Golub Capital BDC Inc (NASDAQ:GBDC), Telephone & Data Systems, Inc. (NYSE:TDS), O-I Glass, Inc. (NYSE:OI), Veoneer, Inc. (NYSE:VNE), and First Bancorp (NYSE:FBP). This group of stocks' market valuations match MD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBH,13,108805,-1 B,12,42332,-6 GBDC,16,70331,1 TDS,18,160567,-2 OI,24,309563,1 VNE,12,202058,-1 FBP,25,262617,0 Average,17.1,165182,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $347 million in MD's case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Barnes Group Inc. (NYSE:B) is the least popular one with only 12 bullish hedge fund positions. Mednax Inc. (NYSE:MD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MD is 54.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately MD wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MD were disappointed as the stock returned -10.2% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.