Is Select Medical Holdings Corporation (NYSE:SEM) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Select Medical Holdings Corporation (NYSE:SEM) shareholders have witnessed a decrease in support from the world's most elite money managers of late. Our calculations also showed that SEM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 glance at the recent hedge fund action regarding Select Medical Holdings Corporation (NYSE:SEM).
How are hedge funds trading Select Medical Holdings Corporation (NYSE:SEM)?
At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SEM over the last 16 quarters. 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 Select Medical Holdings Corporation (NYSE:SEM) was held by Deerfield Management, which reported holding $32.4 million worth of stock at the end of March. It was followed by Millennium Management with a $18.8 million position. Other investors bullish on the company included D E Shaw, Healthcor Management LP, and Marshall Wace LLP.
Judging by the fact that Select Medical Holdings Corporation (NYSE:SEM) has faced declining sentiment from the smart money, it's safe to say that there was a specific group of fund managers that elected to cut their entire stakes heading into Q3. Interestingly, Ken Fisher's Fisher Asset Management dumped the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $48.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dropped about $2.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Select Medical Holdings Corporation (NYSE:SEM) but similarly valued. We will take a look at Patterson Companies, Inc. (NASDAQ:PDCO), Mack-Cali Realty Corporation (NYSE:CLI), Jack in the Box Inc. (NASDAQ:JACK), and OSI Systems, Inc. (NASDAQ:OSIS). All of these stocks' market caps are closest to SEM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDCO,23,195300,-5 CLI,13,153567,2 JACK,33,545628,-3 OSIS,13,65185,3 Average,20.5,239920,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $132 million in SEM's case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Mack-Cali Realty Corporation (NYSE:CLI) is the least popular one with only 13 bullish hedge fund positions. Select Medical Holdings Corporation (NYSE:SEM) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on SEM, though not to the same extent, as the stock returned 4.4% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.