Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards STAAR Surgical Company (NASDAQ:STAA).
Is STAAR Surgical Company (NASDAQ:STAA) a buy right now? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions moved up by 8 recently. Our calculations also showed that STAA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). STAA was in 23 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with STAA holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Leland Edwards of Palo Alto Investors
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the fresh hedge fund action encompassing STAAR Surgical Company (NASDAQ:STAA).
How are hedge funds trading STAAR Surgical Company (NASDAQ:STAA)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 53% from the third quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in STAA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Broadwood Capital, managed by Neal C. Bradsher, holds the number one position in STAAR Surgical Company (NASDAQ:STAA). Broadwood Capital has a $381.3 million position in the stock, comprising 44% of its 13F portfolio. Coming in second is Palo Alto Investors, managed by William Leland Edwards, which holds a $132.9 million position; 7.3% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish encompass Efrem Kamen’s Pura Vida Investments, Kevin Kotler’s Broadfin Capital and Mitchell Blutt’s Consonance Capital Management. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to STAAR Surgical Company (NASDAQ:STAA), around 43.96% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, earmarking 7.32 percent of its 13F equity portfolio to STAA.
As aggregate interest increased, specific money managers have been driving this bullishness. Broadfin Capital, managed by Kevin Kotler, established the most valuable position in STAAR Surgical Company (NASDAQ:STAA). Broadfin Capital had $16.3 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $4 million position during the quarter. The following funds were also among the new STAA investors: Richard Driehaus’s Driehaus Capital, Guy Levy’s Soleus Capital, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks similar to STAAR Surgical Company (NASDAQ:STAA). We will take a look at SFL Corporation Ltd. (NYSE:SFL), Comstock Resources Inc (NYSE:CRK), Enerpac Tool Group Corp. (NYSE:EPAC), and Studio City International Holdings Limited (NYSE:MSC). This group of stocks’ market values resemble STAA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFL | 14 | 89602 | 0 |
| CRK | 7 | 3882 | 2 |
| EPAC | 20 | 314293 | 9 |
| MSC | 4 | 239381 | 0 |
| Average | 11.25 | 161790 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $613 million in STAA’s case. Enerpac Tool Group Corp. (NYSE:EPAC) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks STAAR Surgical Company (NASDAQ:STAA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still managed to beat the market by 4.2 percentage points. Hedge funds were also right about betting on STAA as the stock returned -6.9% so far in 2020 (through April 6th) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
