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Did Hedge Funds Make The Right Call On ICU Medical, Inc. (ICUI) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ICU Medical, Inc. (NASDAQ:ICUI) and determine whether hedge funds had an edge regarding this stock.

ICU Medical, Inc. (NASDAQ:ICUI) shareholders have witnessed an increase in enthusiasm from smart money in recent months. ICUI was in 25 hedge funds’ portfolios at the end of March. There were 17 hedge funds in our database with ICUI positions at the end of the previous quarter. Our calculations also showed that ICUI 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.

To most market participants, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our experts look at the top tier of this group, approximately 850 funds. These investment experts preside over bulk of all hedge funds’ total capital, and by tracking their first-class investments, Insider Monkey has spotted various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year 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 .

Broadfin Kevin Kotler

Kevin Kotler of Broadfin Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to go over the key hedge fund action encompassing ICU Medical, Inc. (NASDAQ:ICUI).

What have hedge funds been doing with ICU Medical, Inc. (NASDAQ:ICUI)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 47% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in ICUI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ICUI A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in ICU Medical, Inc. (NASDAQ:ICUI), which was worth $99.3 million at the end of the third quarter. On the second spot was Nitorum Capital which amassed $92.8 million worth of shares. Partner Fund Management, Point72 Asset Management, and Pura Vida Investments 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 Nitorum Capital allocated the biggest weight to ICU Medical, Inc. (NASDAQ:ICUI), around 7.19% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 6.52 percent of its 13F equity portfolio to ICUI.

As one would reasonably expect, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the biggest position in ICU Medical, Inc. (NASDAQ:ICUI). Millennium Management had $10.2 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also made a $3.9 million investment in the stock during the quarter. The following funds were also among the new ICUI investors: Michael Gelband’s ExodusPoint Capital, Brad Farber’s Atika Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks similar to ICU Medical, Inc. (NASDAQ:ICUI). We will take a look at United Therapeutics Corporation (NASDAQ:UTHR), Diamondback Energy Inc (NASDAQ:FANG), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), and China Biologic Products Holdings Inc (NASDAQ:CBPO). This group of stocks’ market valuations are closest to ICUI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UTHR 31 1290986 -5
FANG 31 240887 -13
LECO 19 157727 3
CBPO 16 612733 -3
Average 24.25 575583 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $377 million in ICUI’s case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand China Biologic Products Holdings Inc (NASDAQ:CBPO) is the least popular one with only 16 bullish hedge fund positions. ICU Medical, Inc. (NASDAQ:ICUI) 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. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately ICUI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ICUI were disappointed as the stock returned -8.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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