The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider AMN Healthcare Services Inc (NYSE:AMN) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is AMN Healthcare Services Inc (NYSE:AMN) the right pick for your portfolio? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund positions retreated by 7 lately. Our calculations also showed that AMN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AMN was in 7 hedge funds' portfolios at the end of September. There were 14 hedge funds in our database with AMN positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
[caption id="attachment_25717" align="alignnone" width="548"] Steven Cohen of Point72 Asset Management[/caption]
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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's review the new hedge fund action encompassing AMN Healthcare Services Inc (NYSE:AMN).
How have hedgies been trading AMN Healthcare Services Inc (NYSE:AMN)?
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMN over the last 17 quarters. So, let's find out 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, Steve Cohen's Point72 Asset Management has the biggest position in AMN Healthcare Services Inc (NYSE:AMN), worth close to $18.7 million, amounting to 0.1% of its total 13F portfolio. On Point72 Asset Management's heels is Millennium Management, led by Israel Englander, holding a $14.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions contain Chuck Royce's Royce & Associates, Noam Gottesman's GLG Partners and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position Point72 Asset Management allocated the biggest weight to AMN Healthcare Services Inc (NYSE:AMN), around 0.11% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to AMN.
Because AMN Healthcare Services Inc (NYSE:AMN) has experienced declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of hedge funds who were dropping their full holdings by the end of the third quarter. It's worth mentioning that Ken Grossman and Glen Schneider's SG Capital Management sold off the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $50.8 million in stock. Mark Coe's fund, Intrinsic Edge Capital, also dropped its stock, about $20.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as AMN Healthcare Services Inc (NYSE:AMN) but similarly valued. These stocks are Columbia Banking System Inc (NASDAQ:COLB), Fulton Financial Corp (NASDAQ:FULT), Arrowhead Research Corp (NASDAQ:ARWR), and Meritage Homes Corp (NYSE:MTH). This group of stocks' market caps are similar to AMN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COLB,8,100681,1 FULT,15,17782,1 ARWR,15,156469,-1 MTH,25,360789,10 Average,15.75,158930,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $66 million in AMN's case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Columbia Banking System Inc (NASDAQ:COLB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks AMN Healthcare Services Inc (NYSE:AMN) is even less popular than COLB. Hedge funds dodged a bullet by taking a bearish stance towards AMN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AMN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AMN investors were disappointed as the stock returned 3.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.