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Hedge Funds Have Never Been More Bullish On Magellan Health Inc (MGLN)

Nina Todic

Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Magellan Health Inc (NASDAQ:MGLN) and see how the stock is affected by the recent hedge fund activity.

Magellan Health Inc (NASDAQ:MGLN) has experienced an increase in support from the world's most elite money managers in recent months. Our calculations also showed that mgln isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeff Smith

We're going to review the new hedge fund action regarding Magellan Health Inc (NASDAQ:MGLN).

Hedge fund activity in Magellan Health Inc (NASDAQ:MGLN)

Heading into the second quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in MGLN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MGLN Positions

Among these funds, Starboard Value LP held the most valuable stake in Magellan Health Inc (NASDAQ:MGLN), which was worth $156.2 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $45.5 million worth of shares. Moreover, Point72 Asset Management, Millennium Management, and D E Shaw were also bullish on Magellan Health Inc (NASDAQ:MGLN), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds have been driving this bullishness. 13D Management, managed by Kenneth Squire, assembled the biggest position in Magellan Health Inc (NASDAQ:MGLN). 13D Management had $9.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $8.2 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin's Highbridge Capital Management, Anand Parekh's Alyeska Investment Group, and Robert Emil Zoellner's Alpine Associates.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Magellan Health Inc (NASDAQ:MGLN) but similarly valued. These stocks are Pretium Resources Inc (NYSE:PVG), NBT Bancorp Inc. (NASDAQ:NBTB), Lattice Semiconductor Corporation (NASDAQ:LSCC), and Pacira BioSciences, Inc.(NASDAQ:PCRX). All of these stocks' market caps are closest to MGLN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PVG,21,84984,-1 NBTB,6,7940,-3 LSCC,25,244673,3 PCRX,27,487640,2 Average,19.75,206309,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $384 million in MGLN's case. Pacira BioSciences, Inc. (NASDAQ:PCRX) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Magellan Health Inc (NASDAQ:MGLN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MGLN, though not to the same extent, as the stock returned -0.2% during the same time frame and outperformed the market as well.

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

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