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Do Hedge Funds Love Select Medical Holdings Corporation (SEM)?

Nina Todic

Is Select Medical Holdings Corporation (NYSE:SEM) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. 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.

Select Medical Holdings Corporation (NYSE:SEM) investors should pay attention to an increase in activity from the world's largest hedge funds recently. Our calculations also showed that SEM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). 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 21st century investor’s toolkit there are a multitude of metrics investors have at their disposal to appraise stocks. Two of the most under-the-radar metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outperform the S&P 500 by a healthy margin (see the details here).

[caption id="attachment_747408" align="aligncenter" width="473"] Paul Reeder of PAR Capital Management[/caption]

Paul Reeder PAR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's analyze the fresh hedge fund action regarding Select Medical Holdings Corporation (NYSE:SEM).

How have hedgies been trading Select Medical Holdings Corporation (NYSE:SEM)?

At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SEM over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Deerfield Management was the largest shareholder of Select Medical Holdings Corporation (NYSE:SEM), with a stake worth $28.4 million reported as of the end of September. Trailing Deerfield Management was D E Shaw, which amassed a stake valued at $17.9 million. Healthcor Management, Marshall Wace, and PAR Capital Management 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 Deerfield Management allocated the biggest weight to Select Medical Holdings Corporation (NYSE:SEM), around 1.16% of its 13F portfolio. Healthcor Management is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to SEM.

As one would reasonably expect, specific money managers have jumped into Select Medical Holdings Corporation (NYSE:SEM) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, assembled the most outsized position in Select Medical Holdings Corporation (NYSE:SEM). Magnetar Capital had $0.6 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $0.3 million position during the quarter. The other funds with brand new SEM positions are Donald Sussman's Paloma Partners and Steve Cohen's Point72 Asset Management.

Let's now review hedge fund activity in other stocks similar to Select Medical Holdings Corporation (NYSE:SEM). We will take a look at Option Care Health, Inc. (NASDAQ:BIOS), Evertec Inc (NYSE:EVTC), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and Afya Limited (NASDAQ:AFYA). This group of stocks' market caps match SEM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIOS,18,72446,3 EVTC,24,262435,2 IOVA,28,897726,6 AFYA,7,66858,7 Average,19.25,324866,4.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $111 million in SEM's case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 7 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SEM as the stock returned 33.4% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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