At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
WellCare Health Plans, Inc. (NYSE:WCG) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that WCG isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are seen as slow, outdated financial vehicles of the past. While there are over 8000 funds trading today, Our experts choose to focus on the aristocrats of this group, approximately 750 funds. These money managers manage the lion's share of all hedge funds' total asset base, and by keeping track of their highest performing investments, Insider Monkey has come up with many investment strategies that have historically outpaced the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the key hedge fund action regarding WellCare Health Plans, Inc. (NYSE:WCG).
What have hedge funds been doing with WellCare Health Plans, Inc. (NYSE:WCG)?
At Q2's end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in WCG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in WellCare Health Plans, Inc. (NYSE:WCG) was held by Magnetar Capital, which reported holding $260.2 million worth of stock at the end of March. It was followed by Paulson & Co with a $167.5 million position. Other investors bullish on the company included Partner Fund Management, Citadel Investment Group, and Pentwater Capital Management.
Seeing as WellCare Health Plans, Inc. (NYSE:WCG) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few funds who sold off their positions entirely heading into Q3. Interestingly, Scott Ferguson's Sachem Head Capital said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $95.8 million in call options, and Christopher James's Partner Fund Management was right behind this move, as the fund dumped about $84.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as WellCare Health Plans, Inc. (NYSE:WCG) but similarly valued. These stocks are Martin Marietta Materials, Inc. (NYSE:MLM), Western Digital Corporation (NASDAQ:WDC), Cardinal Health, Inc. (NYSE:CAH), and Korea Electric Power Corporation (NYSE:KEP). This group of stocks' market caps are similar to WCG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MLM,40,2473921,4 WDC,25,500396,-8 CAH,28,764540,2 KEP,7,43572,-3 Average,25,945607,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $1800 million in WCG's case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks WellCare Health Plans, Inc. (NYSE:WCG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WCG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WCG were disappointed as the stock returned -9.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.