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

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Stryker Corporation (NYSE:SYK).

Is Stryker Corporation (NYSE:SYK) a buy right now? Money managers were becoming less confident. The number of bullish hedge fund positions were trimmed by 4 lately. Stryker Corporation (NYSE:SYK) was in 44 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 Q4 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Robert Atchinson of Adage Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. Now we're going to take a gander at the fresh hedge fund action encompassing Stryker Corporation (NYSE:SYK).

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

At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SYK over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SYK A Good Stock To Buy?
Is SYK A Good Stock To Buy?

Among these funds, Fundsmith LLP held the most valuable stake in Stryker Corporation (NYSE:SYK), which was worth $1625.8 million at the end of the fourth quarter. On the second spot was Fisher Asset Management which amassed $630.7 million worth of shares. BlueSpruce Investments, GuardCap Asset Management, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position BlueSpruce Investments allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 8.6% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, designating 6.56 percent of its 13F equity portfolio to SYK.

Seeing as Stryker Corporation (NYSE:SYK) has experienced bearish sentiment from the smart money, it's safe to say that there was a specific group of money managers who were dropping their positions entirely in the fourth quarter. It's worth mentioning that Robert Pitts's Steadfast Capital Management cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at about $206.9 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $40.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the fourth quarter.

Let's also examine hedge fund activity in other stocks similar to Stryker Corporation (NYSE:SYK). These stocks are Booking Holdings Inc. (NASDAQ:BKNG), Goldman Sachs Group, Inc. (NYSE:GS), Uber Technologies, Inc. (NYSE:UBER), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), Fidelity National Information Services Inc. (NYSE:FIS), and Airbnb, Inc. (NASDAQ:ABNB). All of these stocks' market caps resemble SYK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKNG,108,8247434,-5 GS,76,4607743,6 UBER,135,10094450,35 CVS,56,961205,-5 TGT,78,4065099,21 FIS,88,9181248,0 ABNB,68,1610985,68 Average,87,5538309,17.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 87 hedge funds with bullish positions and the average amount invested in these stocks was $5538 million. That figure was $3223 million in SYK's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand CVS Health Corporation (NYSE:CVS) is the least popular one with only 56 bullish hedge fund positions. Compared to these stocks Stryker Corporation (NYSE:SYK) is even less popular than CVS. Our overall hedge fund sentiment score for SYK is 27.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards SYK. Our calculations showed that the top 10 most popular hedge fund stocks returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th but managed to beat the market again by 1.6 percentage points. Unfortunately SYK wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SYK investors were disappointed as the stock returned 7.5% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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