Did Hedge Funds Drop The Ball On Addus Homecare Corporation (ADUS) ?

Asma UL Husna

Sun, Jun 23, 2019, 6:52 PM

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Addus Homecare Corporation (NASDAQ:ADUS).

Hedge fund interest in Addus Homecare Corporation (NASDAQ:ADUS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ADUS to other stocks including ANI Pharmaceuticals Inc (NASDAQ:ANIP), Kornit Digital Ltd. (NASDAQ:KRNT), and Boot Barn Holdings Inc (NYSE:BOOT) to get a better sense of its popularity.

If you'd ask most market participants, hedge funds are viewed as underperforming, outdated financial vehicles of years past. While there are more than 8000 funds in operation today, Our experts hone in on the top tier of this group, about 750 funds. These hedge fund managers manage the majority of the smart money's total asset base, and by monitoring their inimitable stock picks, Insider Monkey has uncovered several investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

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Paul Marshall of Marshall Wace[/caption]

We're going to analyze the recent hedge fund action regarding Addus Homecare Corporation (NASDAQ:ADUS).

What does smart money think about Addus Homecare Corporation (NASDAQ:ADUS)?

Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in ADUS 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.

The largest stake in Addus Homecare Corporation (NASDAQ:ADUS) was held by Renaissance Technologies, which reported holding $25.6 million worth of stock at the end of March. It was followed by Deerfield Management with a $16.1 million position. Other investors bullish on the company included Millennium Management, AQR Capital Management, and Point72 Asset Management.

Seeing as Addus Homecare Corporation (NASDAQ:ADUS) has faced bearish sentiment from the smart money, it's safe to say that there were a few fund managers who sold off their entire stakes heading into Q3. Intriguingly, Matthew Hulsizer's PEAK6 Capital Management sold off the biggest stake of the 700 funds monitored by Insider Monkey, totaling an estimated $0.6 million in stock, and Bruce Kovner's Caxton Associates LP was right behind this move, as the fund said goodbye to about $0.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to Addus Homecare Corporation (NASDAQ:ADUS). These stocks are ANI Pharmaceuticals Inc (NASDAQ:ANIP), Kornit Digital Ltd. (NASDAQ:KRNT), Boot Barn Holdings Inc (NYSE:BOOT), and Washington Trust Bancorp, Inc. (NASDAQ:WASH). This group of stocks' market valuations resemble ADUS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANIP,17,82176,4 KRNT,10,42618,-4 BOOT,23,154459,4 WASH,4,25232,-2 Average,13.5,76121,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $74 million in ADUS's case. Boot Barn Holdings Inc (NYSE:BOOT) is the most popular stock in this table. On the other hand Washington Trust Bancorp, Inc. (NASDAQ:WASH) is the least popular one with only 4 bullish hedge fund positions. Addus Homecare Corporation (NASDAQ:ADUS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on ADUS as the stock returned 19.3% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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