We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Universal Health Services, Inc. (NYSE:UHS) based on that data.
Universal Health Services, Inc. (NYSE:UHS) investors should pay attention to a decrease in support from the world's most elite money managers lately. UHS was in 30 hedge funds' portfolios at the end of March. There were 31 hedge funds in our database with UHS positions at the end of the previous quarter. Our calculations also showed that UHS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
[caption id="attachment_26869" align="aligncenter" width="400"] Larry Robbins of Glenview Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's go over the recent hedge fund action regarding Universal Health Services, Inc. (NYSE:UHS).
Hedge fund activity in Universal Health Services, Inc. (NYSE:UHS)
At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UHS over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Universal Health Services, Inc. (NYSE:UHS), which was worth $180.2 million at the end of the third quarter. On the second spot was Camber Capital Management which amassed $111.5 million worth of shares. Glenview Capital, Arrowstreet Capital, and Deerfield 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 Camber Capital Management allocated the biggest weight to Universal Health Services, Inc. (NYSE:UHS), around 6.66% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, earmarking 2.58 percent of its 13F equity portfolio to UHS.
Judging by the fact that Universal Health Services, Inc. (NYSE:UHS) has faced bearish sentiment from the smart money, it's safe to say that there was a specific group of hedgies who were dropping their positions entirely heading into Q4. It's worth mentioning that Renaissance Technologies said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $27.5 million in stock. John Brennan's fund, Sirios Capital Management, also sold off its stock, about $18 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Universal Health Services, Inc. (NYSE:UHS) but similarly valued. We will take a look at EXACT Sciences Corporation (NASDAQ:EXAS), Allegion plc (NYSE:ALLE), Pinnacle West Capital Corporation (NYSE:PNW), and Cheniere Energy, Inc. (NYSE:LNG). All of these stocks' market caps are closest to UHS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXAS,34,514351,-7 ALLE,31,404344,6 PNW,25,923395,0 LNG,39,1880676,-4 Average,32.25,930692,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $931 million. That figure was $444 million in UHS's case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Pinnacle West Capital Corporation (NYSE:PNW) is the least popular one with only 25 bullish hedge fund positions. Universal Health Services, Inc. (NYSE:UHS) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately UHS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); UHS investors were disappointed as the stock returned 6.4% during the second quarter 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.