World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Stryker Corporation (NYSE:SYK) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that SYK isn't among the 30 most popular stocks among hedge funds (watch the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. We're going to check out the key hedge fund action encompassing Stryker Corporation (NYSE:SYK).
What have hedge funds been doing with Stryker Corporation (NYSE:SYK)?
Heading into the third quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in SYK a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Stryker Corporation (NYSE:SYK) was held by Partner Fund Management, which reported holding $88.2 million worth of stock at the end of March. It was followed by AQR Capital Management with a $80.7 million position. Other investors bullish on the company included Adage Capital Management, D E Shaw, and Rock Springs Capital Management.
Since Stryker Corporation (NYSE:SYK) has experienced bearish sentiment from the smart money, it's easy to see that there exists a select few hedge funds that slashed their positions entirely last quarter. Interestingly, Israel Englander's Millennium Management said goodbye to the largest position of the 750 funds watched by Insider Monkey, totaling about $107.2 million in stock, and Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital was right behind this move, as the fund said goodbye to about $10.8 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Stryker Corporation (NYSE:SYK) but similarly valued. We will take a look at Bristol Myers Squibb Company (NYSE:BMY), The Goldman Sachs Group, Inc. (NYSE:GS), Uber Technologies, Inc. (NYSE:UBER), and Banco Santander, S.A. (NYSE:SAN). This group of stocks' market valuations match SYK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMY,65,3885775,-6 GS,61,8200703,-15 UBER,56,5766639,56 SAN,22,701860,-1 Average,51,4638744,8.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $4639 million. That figure was $490 million in SYK's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 22 bullish hedge fund positions. Stryker Corporation (NYSE:SYK) 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 SYK, though not to the same extent, as the stock returned 5.5% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.