Is Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) investors should pay attention to an increase in hedge fund interest recently. FMS was in 9 hedge funds' portfolios at the end of the second quarter of 2019. There were 7 hedge funds in our database with FMS positions at the end of the previous quarter. Our calculations also showed that FMS isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. Let's take a gander at the latest hedge fund action regarding Fresenius Medical Care AG & Co. KGaA (NYSE:FMS).
How are hedge funds trading Fresenius Medical Care AG & Co. KGaA (NYSE:FMS)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in FMS 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.
The largest stake in Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) was held by Marshall Wace LLP, which reported holding $2.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $2.1 million position. Other investors bullish on the company included Arrowstreet Capital, ExodusPoint Capital, and D E Shaw.
As one would reasonably expect, key money managers have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, initiated the most outsized position in Fresenius Medical Care AG & Co. KGaA (NYSE:FMS). ExodusPoint Capital had $0.9 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new FMS positions are Ken Griffin's Citadel Investment Group and Thomas Bailard's Bailard Inc.
Let's go over hedge fund activity in other stocks similar to Fresenius Medical Care AG & Co. KGaA (NYSE:FMS). These stocks are Ball Corporation (NYSE:BLL), Zimmer Biomet Holdings Inc (NYSE:ZBH), Agilent Technologies Inc. (NYSE:A), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). All of these stocks' market caps resemble FMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLL,27,668641,0 ZBH,42,1424896,7 A,39,1826200,-2 IDXX,37,711119,8 Average,36.25,1157714,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $1158 million. That figure was $9 million in FMS's case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Ball Corporation (NYSE:BLL) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is even less popular than BLL. Hedge funds dodged a bullet by taking a bearish stance towards FMS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FMS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FMS investors were disappointed as the stock returned -14.5% 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 so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.