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In this article we are going to use hedge fund sentiment as a tool and determine whether Universal Health Services, Inc. (NYSE:UHS) 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.
Universal Health Services, Inc. (NYSE:UHS) investors should be aware of an increase in support from the world's most elite money managers recently. Universal Health Services, Inc. (NYSE:UHS) was in 38 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 44. Our calculations also showed that UHS isn't among the 30 most popular stocks among hedge funds (click for Q2 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 tons of formulas stock market investors have at their disposal to evaluate publicly traded companies. A couple of the most underrated formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outclass the broader indices by a healthy amount (see the details here).
Larry Robbins of Glenview Capital
At Insider Monkey we scour multiple sources to uncover 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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let's go over the recent hedge fund action surrounding Universal Health Services, Inc. (NYSE:UHS).
What have hedge funds been doing with Universal Health Services, Inc. (NYSE:UHS)?
At second quarter's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in UHS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Universal Health Services, Inc. (NYSE:UHS), with a stake worth $111.3 million reported as of the end of June. Trailing AQR Capital Management was Camber Capital Management, which amassed a stake valued at $92.9 million. Glenview Capital, Woodline Partners, and Renaissance Technologies 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 Solel Partners allocated the biggest weight to Universal Health Services, Inc. (NYSE:UHS), around 8.47% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 5.31 percent of its 13F equity portfolio to UHS.
As aggregate interest increased, key money managers were leading the bulls' herd. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, established the most valuable position in Universal Health Services, Inc. (NYSE:UHS). Woodline Partners had $23.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $22.9 million investment in the stock during the quarter. The other funds with brand new UHS positions are Craig Peskin and Peter Fleiss's Solel Partners, Bhagwan Jay Rao's Integral Health Asset Management, and Vishal Saluja and Pham Quang's Endurant Capital Management.
Let's go over hedge fund activity in other stocks similar to Universal Health Services, Inc. (NYSE:UHS). These stocks are Paylocity Holding Corp (NASDAQ:PCTY), Regency Centers Corp (NASDAQ:REG), Generac Holdings Inc. (NYSE:GNRC), Elastic N.V. (NYSE:ESTC), Tenaris S.A. (NYSE:TS), Weibo Corp (NASDAQ:WB), and Host Hotels and Resorts Inc (NASDAQ:HST). This group of stocks' market valuations are similar to UHS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCTY,24,476733,-9 REG,15,124124,-3 GNRC,36,473108,7 ESTC,43,1385856,10 TS,12,204534,-3 WB,14,92970,4 HST,29,221044,5 Average,24.7,425481,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $446 million in UHS's case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 12 bullish hedge fund positions. Universal Health Services, Inc. (NYSE:UHS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UHS is 77.8. 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. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on UHS as the stock returned 17.9% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.