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In this article we are going to use hedge fund sentiment as a tool and determine whether Stryker Corporation (NYSE:SYK) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is SYK stock a buy or sell? 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. SYK investors should pay attention to a decrease in hedge fund interest lately. There were 48 hedge funds in our database with SYK positions at the end of the third quarter. Our calculations also showed that SYK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Keeping this in mind let's take a look at the key hedge fund action surrounding Stryker Corporation (NYSE:SYK).
Do Hedge Funds Think SYK Is A Good Stock To Buy Now?
At the end of December, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the third quarter of 2020. By comparison, 43 hedge funds held shares or bullish call options in SYK a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Terry Smith's Fundsmith LLP has the largest position in Stryker Corporation (NYSE:SYK), worth close to $1.6258 billion, corresponding to 5.4% of its total 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which holds a $630.7 million position; 0.5% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish contain Tim Hurd and Ed Magnus's BlueSpruce Investments, Guardian Capital's GuardCap Asset Management and Phill Gross and Robert Atchinson's Adage Capital Management. 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, dishing out 6.56 percent of its 13F equity portfolio to SYK.
Due to the fact that Stryker Corporation (NYSE:SYK) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers that elected to cut their positions entirely last quarter. Intriguingly, Robert Pitts's Steadfast Capital Management cut the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $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 moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Stryker Corporation (NYSE:SYK). We will take a look at Booking Holdings Inc. (NASDAQ:BKNG), The 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). This group of stocks' market values match SYK's market value.
[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 20 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th but managed to beat the market again by 0.8 percentage points. Unfortunately SYK wasn't nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); SYK investors were disappointed as the stock returned -6.1% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.