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Was The Smart Money Right About Stryker Corporation (SYK)?

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·6 min read
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  • SYK

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Stryker Corporation (NYSE:SYK).

Stryker Corporation (NYSE:SYK) investors should be aware of an increase in hedge fund interest in recent months. Stryker Corporation (NYSE:SYK) was in 48 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that SYK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Arthur B Cohen and Joseph Healey of Healthcor Management LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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. With all of this in mind let's take a look at the latest hedge fund action surrounding Stryker Corporation (NYSE:SYK).

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

At the end of the second quarter, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. By comparison, 50 hedge funds held shares or bullish call options in SYK 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 Stryker Corporation (NYSE:SYK) was held by Fundsmith LLP, which reported holding $1821.8 million worth of stock at the end of June. It was followed by Fisher Asset Management with a $737.6 million position. Other investors bullish on the company included Citadel Investment Group, BlueSpruce Investments, and Adage Capital Management. In terms of the portfolio weights assigned to each position Fundsmith LLP allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 5.05% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, setting aside 4.7 percent of its 13F equity portfolio to SYK.

As industrywide interest jumped, specific money managers were leading the bulls' herd. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the most valuable position in Stryker Corporation (NYSE:SYK). Healthcor Management LP had $71 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also made a $8 million investment in the stock during the quarter. The other funds with brand new SYK positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Andrew Weiss's Weiss Asset Management, and D. E. Shaw's D E Shaw.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Stryker Corporation (NYSE:SYK) but similarly valued. We will take a look at Micron Technology, Inc. (NASDAQ:MU), Moderna, Inc. (NASDAQ:MRNA), Uber Technologies, Inc. (NYSE:UBER), Anthem Inc (NYSE:ANTM), Lam Research Corporation (NASDAQ:LRCX), Airbnb, Inc. (NASDAQ:ABNB), and British American Tobacco plc (NYSE:BTI). All of these stocks' market caps match SYK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MU,87,6333058,-13 MRNA,37,5754554,-2 UBER,135,10412577,5 ANTM,67,4838358,9 LRCX,58,3719258,4 ABNB,58,2711062,6 BTI,12,1011787,-2 Average,64.9,4968665,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 64.9 hedge funds with bullish positions and the average amount invested in these stocks was $4969 million. That figure was $3369 million in SYK's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 12 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SYK is 50.4. 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 negative signal and 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately SYK wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SYK investors were disappointed as the stock returned 6.6% since the end of June (through 11/5) 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 most of these stocks already outperformed the market in 2021.

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