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AtriCure Inc. (ATRC): Were Hedge Funds Right About Buying This Stock?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards AtriCure Inc. (NASDAQ:ATRC) and determine whether hedge funds skillfully traded this stock.

AtriCure Inc. (NASDAQ:ATRC) has seen an increase in hedge fund interest lately. ATRC was in 20 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with ATRC positions at the end of the previous quarter. Our calculations also showed that ATRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are seen as slow, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at present, Our experts hone in on the masters of this group, about 850 funds. These investment experts preside over most of all hedge funds’ total asset base, and by monitoring their matchless stock picks, Insider Monkey has identified a few investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Justin John Ferayorni - Tamarack Capital Management

Justin John Ferayorni of Tamarack Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s analyze the key hedge fund action surrounding AtriCure Inc. (NASDAQ:ATRC).

What does smart money think about AtriCure Inc. (NASDAQ:ATRC)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ATRC over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, OrbiMed Advisors held the most valuable stake in AtriCure Inc. (NASDAQ:ATRC), which was worth $31.2 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $30.2 million worth of shares. Tamarack Capital Management, Renaissance Technologies, and Millennium Management 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 Tamarack Capital Management allocated the biggest weight to AtriCure Inc. (NASDAQ:ATRC), around 7.63% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 3.36 percent of its 13F equity portfolio to ATRC.

As one would reasonably expect, key hedge funds were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the most outsized position in AtriCure Inc. (NASDAQ:ATRC). Adage Capital Management had $30.2 million invested in the company at the end of the quarter. Efrem Kamen’s Pura Vida Investments also initiated a $13.1 million position during the quarter. The following funds were also among the new ATRC investors: Joseph Edelman’s Perceptive Advisors, Michael Gelband’s ExodusPoint Capital, and Vishal Saluja and Pham Quang’s Endurant Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to AtriCure Inc. (NASDAQ:ATRC). These stocks are Green Dot Corporation (NYSE:GDOT), Brooge Energy Limited (NASDAQ:BROG), American Eagle Outfitters Inc. (NYSE:AEO), and Corecivic Inc. (NYSE:CXW). All of these stocks’ market caps resemble ATRC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GDOT 22 376626 -1
BROG 7 49414 4
AEO 26 133187 2
CXW 18 109733 -7
Average 18.25 167240 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $185 million in ATRC’s case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Brooge Energy Limited (NASDAQ:BROG) is the least popular one with only 7 bullish hedge fund positions. AtriCure Inc. (NASDAQ:ATRC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on ATRC as the stock returned 36% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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