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 December 31 holdings, data that is available nowhere else. Should you consider Medifast, Inc. (NYSE:MED) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Medifast, Inc. (NYSE:MED) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Liberty Oilfield Services Inc. (NYSE:LBRT), CRISPR Therapeutics AG (NASDAQ:CRSP), and WestAmerica Bancorp. (NASDAQ:WABC) to gather more data points.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Let's view the latest hedge fund action surrounding Medifast, Inc. (NYSE:MED).
How are hedge funds trading Medifast, Inc. (NYSE:MED)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in MED a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Medifast, Inc. (NYSE:MED). Renaissance Technologies has a $123.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $25.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Israel Englander's Millennium Management, Joel Ramin's 12 West Capital Management and Cliff Asness's AQR Capital Management.
Judging by the fact that Medifast, Inc. (NYSE:MED) has experienced falling interest from hedge fund managers, we can see that there is a sect of funds who sold off their full holdings in the third quarter. Intriguingly, Steven Boyd's Armistice Capital dropped the largest position of the 700 funds watched by Insider Monkey, worth about $5.3 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $5 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Medifast, Inc. (NYSE:MED) but similarly valued. We will take a look at Liberty Oilfield Services Inc. (NYSE:LBRT), CRISPR Therapeutics AG (NASDAQ:CRSP), WestAmerica Bancorp. (NASDAQ:WABC), and Aimmune Therapeutics Inc (NASDAQ:AIMT). This group of stocks' market valuations match MED's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBRT,12,75972,4 CRSP,11,89245,-5 WABC,5,4479,1 AIMT,16,188597,-2 Average,11,89573,-0.5 [/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 $90 million. That figure was $270 million in MED's case. Aimmune Therapeutics Inc (NASDAQ:AIMT) is the most popular stock in this table. On the other hand WestAmerica Bancorp. (NASDAQ:WABC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Medifast, Inc. (NYSE:MED) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MED, though not to the same extent, as the stock returned 18.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.