The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Surgery Partners, Inc. (NASDAQ:SGRY) and find out how it is affected by hedge funds' moves.
Is Surgery Partners, Inc. (NASDAQ:SGRY) a buy, sell, or hold? Prominent investors are becoming hopeful. The number of long hedge fund bets advanced by 1 in recent months. Our calculations also showed that SGRY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SGRY was in 12 hedge funds' portfolios at the end of the third quarter of 2019. There were 11 hedge funds in our database with SGRY holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are seen as underperforming, outdated investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the masters of this group, around 750 funds. Most estimates calculate that this group of people command the majority of the smart money's total capital, and by paying attention to their finest picks, Insider Monkey has discovered several investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/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 take a look at the fresh hedge fund action encompassing Surgery Partners, Inc. (NASDAQ:SGRY).
What does smart money think about Surgery Partners, Inc. (NASDAQ:SGRY)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SGRY over the last 17 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Surgery Partners, Inc. (NASDAQ:SGRY), which was worth $10.6 million at the end of the third quarter. On the second spot was Highland Capital Management which amassed $7.3 million worth of shares. Millennium Management, Citadel Investment Group, and Camber 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 Voce Capital allocated the biggest weight to Surgery Partners, Inc. (NASDAQ:SGRY), around 0.52% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, designating 0.46 percent of its 13F equity portfolio to SGRY.
Consequently, specific money managers were leading the bulls' herd. Voce Capital, managed by J. Daniel Plants, initiated the most valuable position in Surgery Partners, Inc. (NASDAQ:SGRY). Voce Capital had $1 million invested in the company at the end of the quarter. Brian J. Higgins's King Street Capital also made a $0.9 million investment in the stock during the quarter. The following funds were also among the new SGRY investors: Michael Gelband's ExodusPoint Capital and Donald Sussman's Paloma Partners.
Let's also examine hedge fund activity in other stocks similar to Surgery Partners, Inc. (NASDAQ:SGRY). We will take a look at Home Bancorp, Inc. (NASDAQ:HBCP), ObsEva SA (NASDAQ:OBSV), Lands' End, Inc. (NASDAQ:LE), and McDermott International, Inc. (NYSE:MDR). This group of stocks' market valuations are closest to SGRY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HBCP,5,10676,3 OBSV,8,49359,0 LE,12,69409,0 MDR,19,52301,-3 Average,11,45436,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $32 million in SGRY's case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Home Bancorp, Inc. (NASDAQ:HBCP) is the least popular one with only 5 bullish hedge fund positions. Surgery Partners, Inc. (NASDAQ:SGRY) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SGRY as the stock returned 86.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.