Is AdaptHealth Corp. (AHCO) A Good Stock To Buy?

·6 min read

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards AdaptHealth Corp. (NASDAQ:AHCO).

Is AHCO a good stock to buy? Money managers were turning bullish. The number of bullish hedge fund positions advanced by 3 in recent months. AdaptHealth Corp. (NASDAQ:AHCO) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 23. Our calculations also showed that AHCO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you'd ask most shareholders, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading today, Our experts hone in on the top tier of this group, approximately 850 funds. These investment experts handle the majority of the smart money's total capital, and by keeping an eye on their first-class investments, Insider Monkey has found many investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Andreas Halvorsen
Andreas Halvorsen

Andreas Halvorsen of Viking Global

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

At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in AHCO a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is AHCO A Good Stock To Buy?
Is AHCO A Good Stock To Buy?

The largest stake in AdaptHealth Corp. (NASDAQ:AHCO) was held by Deerfield Management, which reported holding $201.6 million worth of stock at the end of June. It was followed by Viking Global with a $84.9 million position. Other investors bullish on the company included Maverick Capital, Armistice Capital, and Kent Lake Capital. In terms of the portfolio weights assigned to each position Kent Lake Capital allocated the biggest weight to AdaptHealth Corp. (NASDAQ:AHCO), around 5.51% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 3.58 percent of its 13F equity portfolio to AHCO.

As industrywide interest jumped, key money managers have jumped into AdaptHealth Corp. (NASDAQ:AHCO) headfirst. Viking Global, managed by Andreas Halvorsen, assembled the most valuable position in AdaptHealth Corp. (NASDAQ:AHCO). Viking Global had $84.9 million invested in the company at the end of the quarter. Steven Boyd's Armistice Capital also initiated a $20.2 million position during the quarter. The following funds were also among the new AHCO investors: Justin John Ferayorni's Tamarack Capital Management, Ray Dalio's Bridgewater Associates, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's now review hedge fund activity in other stocks similar to AdaptHealth Corp. (NASDAQ:AHCO). We will take a look at Applied Industrial Technologies Inc (NYSE:AIT), Fabrinet (NYSE:FN), Insight Enterprises, Inc. (NASDAQ:NSIT), Investors Bancorp, Inc. (NASDAQ:ISBC), Ameris Bancorp (NASDAQ:ABCB), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Triton International Limited (NYSE:TRTN). All of these stocks' market caps are similar to AHCO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AIT,18,57979,-3 FN,14,125328,-1 NSIT,19,368371,2 ISBC,15,53960,3 ABCB,15,89100,-1 KTOS,18,285414,2 TRTN,24,274512,-6 Average,17.6,179238,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $367 million in AHCO's case. Triton International Limited (NYSE:TRTN) is the most popular stock in this table. On the other hand Fabrinet (NYSE:FN) is the least popular one with only 14 bullish hedge fund positions. AdaptHealth Corp. (NASDAQ:AHCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AHCO is 64.1. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately AHCO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AHCO were disappointed as the stock returned -6.6% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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