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Where Do Hedge Funds Stand On Community Health Systems, Inc. (CYH)?

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In this article we will take a look at whether hedge funds think Community Health Systems, Inc. (NYSE:CYH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Community Health Systems, Inc. (NYSE:CYH) investors should be aware of a decrease in enthusiasm from smart money lately. Community Health Systems, Inc. (NYSE:CYH) was in 22 hedge funds' portfolios at the end of September. The all time high for this statistic is 59. There were 25 hedge funds in our database with CYH holdings at the end of June. Our calculations also showed that CYH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. Now let's take a look at the new hedge fund action encompassing Community Health Systems, Inc. (NYSE:CYH).

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

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

Heading into the fourth quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the second quarter of 2021. By comparison, 22 hedge funds held shares or bullish call options in CYH a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eversept Partners, managed by Kamran Moghtaderi, holds the number one position in Community Health Systems, Inc. (NYSE:CYH). Eversept Partners has a $70.1 million position in the stock, comprising 5.2% of its 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $40.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Chuck Royce's Royce & Associates, Mark T. Gallogly's Centerbridge Partners and Dov Gertzulin's DG Capital Management. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to Community Health Systems, Inc. (NYSE:CYH), around 5.25% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, setting aside 3.31 percent of its 13F equity portfolio to CYH.

Seeing as Community Health Systems, Inc. (NYSE:CYH) has experienced bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of fund managers who sold off their full holdings by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the biggest stake of all the hedgies watched by Insider Monkey, valued at about $5.3 million in call options. Gavin Saitowitz and Cisco J. del Valle's fund, Prelude Capital (previously Springbok Capital), also dumped its call options, about $1.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks similar to Community Health Systems, Inc. (NYSE:CYH). These stocks are MAG Silver Corporation (NYSE:MAG), Yext, Inc. (NYSE:YEXT), Radware Ltd. (NASDAQ:RDWR), Bionano Genomics, Inc. (NASDAQ:BNGO), Cyxtera Technologies Inc. (NASDAQ:CYXT), Velo3D Inc. (NYSE:VLD), and Hims & Hers Health, Inc. (NYSE:HIMS). This group of stocks' market caps are closest to CYH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAG,13,96760,0 YEXT,14,24953,-5 RDWR,17,267737,-2 BNGO,14,13361,-3 CYXT,15,177946,15 VLD,17,95409,17 HIMS,14,55223,-8 Average,14.9,104484,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $245 million in CYH's case. Radware Ltd. (NASDAQ:RDWR) is the most popular stock in this table. On the other hand MAG Silver Corporation (NYSE:MAG) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Community Health Systems, Inc. (NYSE:CYH) is more popular among hedge funds. Our overall hedge fund sentiment score for CYH is 63.2. 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 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 returned 29.6% in 2021 and managed to beat the market by 3.6 percentage points. Hedge funds were also right about betting on CYH as the stock returned 13.8% since the end of September (through 12/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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