Is Natus Medical Inc (BABY) A Good Stock To Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Natus Medical Inc (NASDAQ:BABY) .

Natus Medical Inc (NASDAQ:BABY) was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. BABY has experienced a decrease in hedge fund sentiment of late. There were 20 hedge funds in our database with BABY holdings at the end of the previous quarter. At the end of this article we will also compare BABY to other stocks including CVR Refining LP (NYSE:CVRR), Flow International Corporation (NASDAQ:FLOW), and Methode Electronics Inc. (NYSE:MEI) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to review the key action encompassing Natus Medical Inc (NASDAQ:BABY).

How are hedge funds trading Natus Medical Inc (NASDAQ:BABY)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a plunge of 25% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in BABY heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the number one position in Natus Medical Inc (NASDAQ:BABY), worth close to $24 million. Coming in second is Ric Dillon’s Diamond Hill Capital holding a $23.2 million position. Other peers that are bullish encompass Brian C. Freckmann’s Lyon Street Capital, Ed Beddow and William Tichy’s Beddow Capital Management and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cashed in the largest position of the 700 funds followed by Insider Monkey, totaling an estimated $23.5 million in stock, and Ken Grossman and Glen Schneider’s SG Capital Management was right behind this move, as the fund cut about $17.7 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Natus Medical Inc (NASDAQ:BABY) but similarly valued. These stocks are CVR Refining LP (NYSE:CVRR), Flow International Corporation (NASDAQ:FLOW), Methode Electronics Inc. (NYSE:MEI), and Denbury Resources Inc. (NYSE:DNR). This group of stocks’ market caps are closest to BABY’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $94 million in BABY’s case. Denbury Resources Inc. (NYSE:DNR) is the most popular stock in this table. On the other hand CVR Refining LP (NYSE:CVRR) is the least popular one with only 6 bullish hedge fund positions. Natus Medical Inc (NASDAQ:BABY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DNR might be a better candidate to consider taking a long position in.

Disclosure: None