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Did Hedge Funds Drop The Ball On Nevro Corp (NVRO)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Nevro Corp (NYSE:NVRO).

Nevro Corp (NYSE:NVRO) was in 28 hedge funds’ portfolios at the end of the second quarter of 2019. NVRO has experienced a decrease in support from the world’s most elite money managers recently. There were 32 hedge funds in our database with NVRO holdings at the end of the previous quarter. Our calculations also showed that NVRO isn’t among the 30 most popular stocks among hedge funds (see 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.

Phill Gross, Adage Capital Management

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 take a look at the latest hedge fund action encompassing Nevro Corp (NYSE:NVRO).

How are hedge funds trading Nevro Corp (NYSE:NVRO)?

At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NVRO over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NVRO Positions

Among these funds, D E Shaw held the most valuable stake in Nevro Corp (NYSE:NVRO), which was worth $134 million at the end of the second quarter. On the second spot was Healthcor Management LP which amassed $79.6 million worth of shares. Moreover, Perceptive Advisors, Partner Fund Management, and Adage Capital Management were also bullish on Nevro Corp (NYSE:NVRO), allocating a large percentage of their portfolios to this stock.

Seeing as Nevro Corp (NYSE:NVRO) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their entire stakes by the end of the second quarter. Interestingly, Michael Johnston’s Steelhead Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at about $18.2 million in stock, and Roberto Mignone’s Bridger Management was right behind this move, as the fund dropped about $11.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to Nevro Corp (NYSE:NVRO). We will take a look at Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Capitol Federal Financial, Inc. (NASDAQ:CFFN), Natera Inc (NASDAQ:NTRA), and Banner Corporation (NASDAQ:BANR). All of these stocks’ market caps are similar to NVRO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPBI 8 78342 -3
CFFN 11 151317 0
NTRA 20 242886 2
BANR 16 87634 -2
Average 13.75 140045 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $550 million in NVRO’s case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Nevro Corp (NYSE:NVRO) 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 NVRO as the stock returned 32.6% 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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