In this article we will take a look at whether hedge funds think Medifast, Inc. (NYSE:MED) 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.
Is Medifast, Inc. (NYSE:MED) a first-rate stock to buy now? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions increased by 1 in recent months. Medifast, Inc. (NYSE:MED) was in 23 hedge funds' portfolios at the end of June. The all time high for this statistic is 28. Our calculations also showed that MED isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the new hedge fund action surrounding Medifast, Inc. (NYSE:MED).
Do Hedge Funds Think MED Is A Good Stock To Buy Now?
At second quarter's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in MED 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.
More specifically, Renaissance Technologies was the largest shareholder of Medifast, Inc. (NYSE:MED), with a stake worth $253.3 million reported as of the end of June. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $32.3 million. Two Sigma Advisors, GLG Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cinctive Capital Management allocated the biggest weight to Medifast, Inc. (NYSE:MED), around 0.34% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.32 percent of its 13F equity portfolio to MED.
As aggregate interest increased, specific money managers were leading the bulls' herd. Bridgewater Associates, managed by Ray Dalio, established the biggest position in Medifast, Inc. (NYSE:MED). Bridgewater Associates had $5.9 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.4 million investment in the stock during the quarter. The following funds were also among the new MED investors: Peter Muller's PDT Partners and Karim Abbadi and Edward McBride's Centiva Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Medifast, Inc. (NYSE:MED) but similarly valued. These stocks are Dorman Products Inc. (NASDAQ:DORM), Terex Corporation (NYSE:TEX), SAGE Therapeutics Inc (NASDAQ:SAGE), J&J Snack Foods Corp. (NASDAQ:JJSF), LCI Industries (NYSE:LCII), Walker & Dunlop Inc. (NYSE:WD), and Herc Holdings Inc. (NYSE:HRI). This group of stocks' market values are closest to MED's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DORM,18,67951,-3 TEX,27,470987,-4 SAGE,27,258449,0 JJSF,15,70134,0 LCII,15,109332,-3 WD,11,78419,-8 HRI,20,1070371,3 Average,19,303663,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $377 million in MED's case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand Walker & Dunlop Inc. (NYSE:WD) is the least popular one with only 11 bullish hedge fund positions. Medifast, Inc. (NYSE:MED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MED is 68.1. 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 MED wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MED were disappointed as the stock returned -28.3% 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.