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Did Hedge Funds Drop The Ball On CONMED Corporation (CNMD) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 CONMED Corporation (NASDAQ:CNMD).

Is CONMED Corporation (NASDAQ:CNMD) the right pick for your portfolio? Investors who are in the know are taking a pessimistic view. The number of long hedge fund bets decreased by 2 lately. Our calculations also showed that CNMD isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the latest hedge fund action encompassing CONMED Corporation (NASDAQ:CNMD).

How have hedgies been trading CONMED Corporation (NASDAQ:CNMD)?

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CNMD over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CNMD Positions

Of the funds tracked by Insider Monkey, Steve Cohen’s Point72 Asset Management has the largest position in CONMED Corporation (NASDAQ:CNMD), worth close to $63.3 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $43.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Due to the fact that CONMED Corporation (NASDAQ:CNMD) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers who sold off their full holdings by the end of the second quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, totaling close to $16.4 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to CONMED Corporation (NASDAQ:CNMD). These stocks are Independent Bank Group Inc (NASDAQ:IBTX), Prospect Capital Corporation (NASDAQ:PSEC), Premier Inc (NASDAQ:PINC), and SITE Centers Corp. (NYSE:SITC). This group of stocks’ market values are similar to CNMD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBTX 9 95311 -1
PSEC 11 22786 0
PINC 16 198348 0
SITC 15 53109 1
Average 12.75 92389 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $239 million in CNMD’s case. Premier Inc (NASDAQ:PINC) is the most popular stock in this table. On the other hand Independent Bank Group Inc (NASDAQ:IBTX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks CONMED Corporation (NASDAQ:CNMD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CNMD as the stock returned 12.6% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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