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Here’s What Hedge Funds Think About Surgery Partners, Inc. (SGRY)

Nina Todic

Is Surgery Partners, Inc. (NASDAQ:SGRY) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.

Surgery Partners, Inc. (NASDAQ:SGRY) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare SGRY to other stocks including Blue Bird Corporation (NASDAQ:BLBD), Crawford & Company (NYSE:CRD), and Donnelley Financial Solutions, Inc. (NYSE:DFIN) to get a better sense of its popularity.

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.

Chuck Royce

We're going to go over the fresh hedge fund action surrounding Surgery Partners, Inc. (NASDAQ:SGRY).

How are hedge funds trading Surgery Partners, Inc. (NASDAQ:SGRY)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SGRY over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SGRY Positions

The largest stake in Surgery Partners, Inc. (NASDAQ:SGRY) was held by Highland Capital Management, which reported holding $10.5 million worth of stock at the end of December. It was followed by Royce & Associates with a $10.2 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Camber Capital Management.

Seeing as Surgery Partners, Inc. (NASDAQ:SGRY) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Jeremy Green's Redmile Group sold off the largest stake of all the hedgies followed by Insider Monkey, valued at close to $10.5 million in stock. Steve Cohen's fund, Point72 Asset Management, also cut its stock, about $5 million worth. These bearish behaviors are important to note, 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 similar to Surgery Partners, Inc. (NASDAQ:SGRY). These stocks are Blue Bird Corporation (NASDAQ:BLBD), Crawford & Company (NYSE:CRD), Donnelley Financial Solutions, Inc. (NYSE:DFIN), and Anika Therapeutics, Inc. (NASDAQ:ANIK). This group of stocks' market values are similar to SGRY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLBD,7,70468,-11 CRD,6,26707,-1 DFIN,19,54777,5 ANIK,14,53849,1 Average,11.5,51450,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $27 million in SGRY's case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Crawford & Company (NYSE:CRD) is the least popular one with only 6 bullish hedge fund positions. Surgery Partners, Inc. (NASDAQ:SGRY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SGRY wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SGRY investors were disappointed as the stock returned 7.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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