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Hedge Funds Are Piling Into Magellan Health Inc (MGLN)

·6 min read

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Magellan Health Inc (NASDAQ:MGLN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Magellan Health Inc (NASDAQ:MGLN) was in 26 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MGLN investors should pay attention to an increase in enthusiasm from smart money lately. There were 24 hedge funds in our database with MGLN holdings at the end of March. Our calculations also showed that MGLN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are tons of tools stock market investors employ to appraise their stock investments. A couple of the less known tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outperform their index-focused peers by a superb margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Paul Glazer of Glazer Capital
Paul Glazer of Glazer Capital

Paul Glazer of Glazer Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's take a glance at the new hedge fund action encompassing Magellan Health Inc (NASDAQ:MGLN).

Do Hedge Funds Think MGLN Is A Good Stock To Buy Now?

At Q2's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2020. By comparison, 23 hedge funds held shares or bullish call options in MGLN a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Starboard Value LP held the most valuable stake in Magellan Health Inc (NASDAQ:MGLN), which was worth $223.2 million at the end of the second quarter. On the second spot was Glazer Capital which amassed $141.3 million worth of shares. Magnetar Capital, Millennium Management, and Alpine Associates 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 Highland Capital Management allocated the biggest weight to Magellan Health Inc (NASDAQ:MGLN), around 5.92% of its 13F portfolio. Moab Capital Partners is also relatively very bullish on the stock, designating 4.79 percent of its 13F equity portfolio to MGLN.

Now, key hedge funds have jumped into Magellan Health Inc (NASDAQ:MGLN) headfirst. Soros Fund Management, managed by George Soros, assembled the most valuable position in Magellan Health Inc (NASDAQ:MGLN). Soros Fund Management had $36 million invested in the company at the end of the quarter. James Dondero's Highland Capital Management also made a $27.1 million investment in the stock during the quarter. The only other fund with a brand new MGLN position is Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's check out hedge fund activity in other stocks similar to Magellan Health Inc (NASDAQ:MGLN). These stocks are Retail Properties of America Inc (NYSE:RPAI), Boot Barn Holdings Inc (NYSE:BOOT), Federal Signal Corporation (NYSE:FSS), FibroGen Inc (NASDAQ:FGEN), Forward Air Corporation (NASDAQ:FWRD), ESCO Technologies Inc. (NYSE:ESE), and Vericel Corp (NASDAQ:VCEL). This group of stocks' market valuations match MGLN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPAI,16,40374,7 BOOT,29,217618,11 FSS,13,46834,0 FGEN,17,192268,-1 FWRD,19,318287,6 ESE,13,78678,5 VCEL,19,86566,1 Average,18,140089,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $828 million in MGLN's case. Boot Barn Holdings Inc (NYSE:BOOT) is the most popular stock in this table. On the other hand Federal Signal Corporation (NYSE:FSS) is the least popular one with only 13 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 overall hedge fund sentiment score for MGLN is 77.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately MGLN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MGLN were disappointed as the stock returned 0.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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