Is McKesson Corporation (NYSE:MCK) a great stock to buy now? The best stock pickers are becoming more optimistic. The number of long hedge fund positions inched up by 2 in recent months. Our calculations also showed that MCK isn't among the 30 most popular stocks among hedge funds. MCK was in 44 hedge funds' portfolios at the end of December. There were 42 hedge funds in our database with MCK positions at the end of the previous quarter.
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.
We're going to take a gander at the recent hedge fund action surrounding McKesson Corporation (NYSE:MCK).
How are hedge funds trading McKesson Corporation (NYSE:MCK)?
At Q4's end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in MCK a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Glenview Capital held the most valuable stake in McKesson Corporation (NYSE:MCK), which was worth $499.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $366 million worth of shares. Moreover, Pzena Investment Management, Baupost Group, and Renaissance Technologies were also bullish on McKesson Corporation (NYSE:MCK), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have jumped into McKesson Corporation (NYSE:MCK) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, initiated the largest position in McKesson Corporation (NYSE:MCK). Stevens Capital Management had $8.4 million invested in the company at the end of the quarter. Justin John Ferayorni's Tamarack Capital Management also initiated a $5.5 million position during the quarter. The other funds with brand new MCK positions are Michael Castor's Sio Capital, Michael Burry's Scion Asset Management, and David Harding's Winton Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as McKesson Corporation (NYSE:MCK) but similarly valued. These stocks are Xilinx, Inc. (NASDAQ:XLNX), CRH PLC (NYSE:CRH), Dollar Tree, Inc. (NASDAQ:DLTR), and Agilent Technologies Inc. (NYSE:A). This group of stocks' market values are similar to MCK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XLNX,48,1156752,12 CRH,8,49486,1 DLTR,53,2163297,0 A,40,1976098,0 Average,37.25,1336408,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1336 million. That figure was $1957 million in MCK's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 8 bullish hedge fund positions. McKesson Corporation (NYSE:MCK) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately MCK wasn't in this group. Hedge funds that bet on MCK were disappointed as the stock returned 10.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.