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Is U.S. Physical Therapy, Inc. (USPH) A Good Stock To Buy?

Asma UL Husna

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like U.S. Physical Therapy, Inc. (NYSE:USPH).

U.S. Physical Therapy, Inc. (NYSE:USPH) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. USPH was in 11 hedge funds' portfolios at the end of the second quarter of 2019. There were 13 hedge funds in our database with USPH positions at the end of the previous quarter. Our calculations also showed that USPH 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.

5 Most Popular Stocks Among Hedge Funds

In today’s marketplace there are plenty of formulas stock market investors put to use to size up their stock investments. A pair of the most useful formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best money managers can trounce the broader indices by a significant margin (see the details here).

USPH_oct2019

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. Let's check out the new hedge fund action regarding U.S. Physical Therapy, Inc. (NYSE:USPH).

How are hedge funds trading U.S. Physical Therapy, Inc. (NYSE:USPH)?

At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in USPH over the last 16 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

AlphaOne Capital Partners' Returns, AUM and Holdings

Among these funds, Renaissance Technologies held the most valuable stake in U.S. Physical Therapy, Inc. (NYSE:USPH), which was worth $44.8 million at the end of the second quarter. On the second spot was Royce & Associates which amassed $12 million worth of shares. Moreover, Citadel Investment Group, AlphaOne Capital Partners, and Weld Capital Management were also bullish on U.S. Physical Therapy, Inc. (NYSE:USPH), allocating a large percentage of their portfolios to this stock.

Since U.S. Physical Therapy, Inc. (NYSE:USPH) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of money managers who sold off their positions entirely heading into Q3. It's worth mentioning that D. E. Shaw's D E Shaw sold off the largest position of the "upper crust" of funds followed by Insider Monkey, valued at about $0.6 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds heading into Q3.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as U.S. Physical Therapy, Inc. (NYSE:USPH) but similarly valued. These stocks are Aircastle Limited (NYSE:AYR), BP Midstream Partners LP (NYSE:BPMP), Studio City International Holdings Limited (NYSE:MSC), and Whiting Petroleum Corporation (NYSE:WLL). This group of stocks' market valuations are similar to USPH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AYR,12,77868,0 BPMP,5,32326,-1 MSC,4,237508,0 WLL,23,280994,-2 Average,11,157174,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $69 million in USPH's case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. U.S. Physical Therapy, Inc. (NYSE:USPH) 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 USPH as the stock returned 6.7% during the same time frame and outperformed the market by an even larger margin.

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

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