Should You Buy St. Jude Medical, Inc. (STJ)?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Hedge fund interest in St. Jude Medical, Inc. (NYSE:STJ) 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 St. Jude Medical, Inc. (NYSE:STJ) to other stocks, including Analog Devices, Inc. (NASDAQ:ADI), Spectra Energy Corp. (NYSE:SE), and Tyson Foods, Inc. (NYSE:TSN) to get a better sense of its popularity.

If you’d ask most market participants, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, Our experts hone in on the crème de la crème of this group, about 700 funds. These hedge fund managers control most of the smart money’s total capital, and by keeping an eye on their inimitable stock picks, Insider Monkey has unsheathed a few investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to take a look at the latest action regarding St. Jude Medical, Inc. (NYSE:STJ).

What have hedge funds been doing with St. Jude Medical, Inc. (NYSE:STJ)?

Heading into Q4, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, David Stemerman’s Conatus Capital Management has the number one position in St. Jude Medical, Inc. (NYSE:STJ), worth close to $91.6 million, accounting for 5.8% of its total 13F portfolio. On Conatus Capital Management’s heels is Curtis Macnguyen of Ivory Capital (Investment Mgmt), with a $79.4 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Israel Englander’s Millennium Management, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Due to the fact that St. Jude Medical, Inc. (NYSE:STJ) has experienced a falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who sold off their entire stakes in the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth about $47.2 million in stock, and Conan Laughlin’s North Tide Capital was right behind this move, as the fund dumped about $36.5 million worth of shares. These moves are important to note, 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 – not necessarily in the same industry as St. Jude Medical, Inc. (NYSE:STJ) but similarly valued. These stocks are Analog Devices, Inc. (NASDAQ:ADI), Spectra Energy Corp. (NYSE:SE), Tyson Foods, Inc. (NYSE:TSN), and Telekomunikasi Indns Tbk Prshn PP PT-ADR (NYSE:TLK). This group of stocks’ market caps is closest to St. Jude Medical, Inc. (NYSE:STJ)’s market cap.

As you can see, these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $794 million. That figure was $600 million in St. Jude Medical, Inc. (NYSE:STJ)’s case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand, Telekomunikasi Indns Tbk Prshn PP PT-ADR (NYSE:TLK) is the least popular one with only 9 bullish hedge fund positions. St. Jude Medical, Inc. (NYSE:STJ) 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, Tyson Foods, Inc. (NYSE:TSN) might be a better candidate to consider a long position.