Most investors tend to think that hedge funds and other asset managers are worthless because they can’t even beat simple index fund portfolios. In fact, most people expect hedge funds to compete and outperform the bull market we have witnessed in recent years. However, hedge funds are usually partially hedged and aim to generate attractive risk-adjusted returns rather than following the ups and downs of the stock markets with the expectation that they will outperform the broader market. Our research shows that some hedge funds have excellent stock picking skills (and we can identify these hedge funds in advance quite precisely), so let’s take a look at the smart money sentiment towards Healthcare. Services Group, Inc. (NASDAQ: HCSG).
Is Health Services Group, Inc. (NASDAQ: HCSG) the right choice for your wallet? Investors who know about it were becoming more optimistic. The number of bullish bets on hedge funds has increased by 1 in recent times. Healthcare Services Group, Inc. (NASDAQ: HCSG) was listed in 19 hedge fund portfolios at the end of March. The historic high for this statistic is 27. Our calculations have also shown that HCSG is not in the top 30 stocks among hedge funds (click for Q1 rank).
According to most market participants, hedge funds are seen as old, worthless financial tools of yesteryear. While there are currently over 8,000 funds with open doors, our experts are looking at the masters of this club, around 850 funds. Most estimates calculate that this group of people administer the majority of the total capital of the hedge fund industry, and by observing their first-class investments, Insider Monkey has spotted a number of investment strategies that have historically surpassed the hedge fund industry. S&P 500 Index. Insider Monkey’s flagship short hedge fund strategy has outperformed the S&P 500 short ETFs by about 20 percentage points per year since its inception in March 2017. In addition, the portfolio of stock selections Longs of our monthly newsletter has returned 206.8% since March 2017 (through May 2021) and has beaten the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter from our website.
Tom Gayner of Markel Gayner Asset Management
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, Chuck Schumer recently said legalizing marijuana would be a Senate priority. So we check this under the radar stock who will benefit. We’re going through lists like the top 10 battery stocks to pick the next Tesla that will deliver 10x performance. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can sign up for our free daily newsletter on our homepage. With that in mind, let’s take a look at the recent hedge fund action surrounding Healthcare Services Group, Inc. (NASDAQ: HCSG).
Do hedge funds think HCSG is a good stock to buy now?
At the end of March, 19 of the hedge funds tracked by Insider Monkey held long positions in this security, a variation of 6% compared to the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position on HCSG a year ago. While hedge fund positions experience their usual ebb and flow, there are a few notable hedge fund managers who were significantly increasing their stakes (or already accumulating large positions).
According to publicly available data on hedge funds and institutional investors compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Healthcare Services Group, Inc. (NASDAQ: HCSG). AQR Capital Management holds a position of $ 39.7 million in the stock, or 0.1% of its 13F portfolio. In second place, Royce & Associates, led by Chuck Royce, has a position of $ 31.4 million; 0.2% of its 13F portfolio is allocated to society. Some other peers with similar optimism include Markel Gayner Asset Management of Tom Gayner, DE Shaw of DE Shaw and Giverny Capital of Francois Rochon. In terms of the portfolio weights assigned to each position, Rutabaga Capital Management assigned the largest weight to Healthcare Services Group, Inc. (NASDAQ: HCSG), approximately 1.14% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, designating 0.68% of its 13F equity portfolio to HCSG.
As you might expect, specific fund managers were behind this uptrend. AlphaCrest Capital Management, managed by Mika Toikka, has established the most valuable position in Healthcare Services Group, Inc. (NASDAQ: HCSG). AlphaCrest Capital Management had $ 0.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also invested $ 0.5 million in the stock during the quarter. The following funds were also among the new investors in the HCSG: Tudor Investment Corp of Paul Tudor Jones and Athanor Capital of Parvinder Thiara.
Let’s look at hedge fund activity in other stocks – not necessarily in the same industry as Healthcare Services Group, Inc. (NASDAQ: HCSG) but of similar value. These shares are Silicon Motion Technology Corp. (NASDAQ: SIMO), Four Corners Property Trust, Inc. (NYSE: FCPT), Lordstown Motors Corp. (NASDAQ: RIDE), Crestwood Equity Partners LP (NYSE: CEQP), Cavco Industries, Inc. (NASDAQ: CVCO), Bally’s Corporation (NYSE: BALY) and NetScout Systems, Inc. (NASDAQ: NTCT). The market valuations of this group of shares are similar to the market valuation of HCSG.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF SIMO position, 24.447993.6 FCPT, 18.115979.6 RIDE, 12.27284, -5 CEQP, 5.9080.3 CVCO, 22,197921,2 BALY, 18,415596, -7 NTCT, 11,115827,4 Medium, 15,7,189954,1,3 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $ 190 million. That figure was $ 148 million in the case of HCSG. Silicon Motion Technology Corp. (NASDAQ: SIMO) is the most popular stock in this chart. On the other hand, Crestwood Equity Partners LP (NYSE: CEQP) is the least popular with only 5 bullish hedge fund positions. Healthcare Services Group, Inc. (NASDAQ: HCSG) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for HCSG is 64. Stocks with a higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal, but we prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations showed that the 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 gained 23.8% in 2021 through July 16 and again beat the market by 7.7 percentage points. Unfortunately, HCSG was not as popular as these 5 stocks and the hedge funds that bet on HCSG were disappointed as the stock has returned 8.1% since the end of March (through 7/16) and has underperformed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Insider Monkey.