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Stryker Corporation (SYK): Are Hedge Funds Right About This Stock?

·6 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Stryker Corporation (NYSE:SYK) based on that data.

Is Stryker Corporation (NYSE:SYK) a buy, sell, or hold? Investors who are in the know were getting more bullish. The number of long hedge fund bets improved by 2 lately. Stryker Corporation (NYSE:SYK) was in 46 hedge funds' portfolios at the end of the first 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 Q1 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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Lee Ainslie's Top 10 Stock Picks
Lee Ainslie's Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Stryker Corporation (NYSE:SYK).

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

Heading into the second quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 48 hedge funds with a bullish position in SYK a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Fundsmith LLP, managed by Terry Smith, holds the biggest position in Stryker Corporation (NYSE:SYK). Fundsmith LLP has a $1.7066 billion position in the stock, comprising 5.4% of its 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $659.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Tim Hurd and Ed Magnus's BlueSpruce Investments, Phill Gross and Robert Atchinson's Adage Capital Management and OrbiMed Advisors. In terms of the portfolio weights assigned to each position Blue Whale Capital allocated the biggest weight to Stryker Corporation (NYSE:SYK), around 5.66% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 5.53 percent of its 13F equity portfolio to SYK.

As one would reasonably expect, some big names were leading the bulls' herd. Alyeska Investment Group, managed by Anand Parekh, initiated the most valuable position in Stryker Corporation (NYSE:SYK). Alyeska Investment Group had $25.6 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $21.1 million investment in the stock during the quarter. The following funds were also among the new SYK investors: John Overdeck and David Siegel's Two Sigma Advisors, Donald Sussman's Paloma Partners, and Lee Ainslie's Maverick Capital.

Let's check out hedge fund activity in other stocks similar to Stryker Corporation (NYSE:SYK). These stocks are GlaxoSmithKline plc (NYSE:GSK), Vale SA (NYSE:VALE), British American Tobacco plc (NYSE:BTI), Anthem Inc (NYSE:ANTM), Intuitive Surgical, Inc. (NASDAQ:ISRG), Fidelity National Information Services Inc. (NYSE:FIS), and Lam Research Corporation (NASDAQ:LRCX). This group of stocks' market valuations resemble SYK's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSK,25,1359731,-5 VALE,31,2615665,-4 BTI,14,1034777,4 ANTM,58,5373054,-12 ISRG,53,2326096,4 FIS,74,8251021,-14 LRCX,54,3164975,-2 Average,44.1,3446474,-4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $3446 million. That figure was $3154 million in SYK's case. Fidelity National Information Services Inc. (NYSE:FIS) 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 14 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SYK is 61.3. 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 positive signal but 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately SYK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SYK were disappointed as the stock returned 4.7% since the end of March (through 6/18) 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 many of these stocks already outperformed the market since 2019.

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