Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Edwards Lifesciences Corporation (NYSE:EW) based on that data and determine whether they were really smart about the stock.
Edwards Lifesciences Corporation (NYSE:EW) has seen a decrease in hedge fund interest of late. Edwards Lifesciences Corporation (NYSE:EW) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 49. Our calculations also showed that EW isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to take a peek at the new hedge fund action encompassing Edwards Lifesciences Corporation (NYSE:EW).
How have hedgies been trading Edwards Lifesciences Corporation (NYSE:EW)?
At the end of June, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in EW a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Edwards Lifesciences Corporation (NYSE:EW). Fisher Asset Management has a $344.7 million position in the stock, comprising 0.3% of its 13F portfolio. On Fisher Asset Management’s heels is AQR Capital Management, led by Cliff Asness, holding a $149.4 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism consist of John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to Edwards Lifesciences Corporation (NYSE:EW), around 2.56% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 2.34 percent of its 13F equity portfolio to EW.
Because Edwards Lifesciences Corporation (NYSE:EW) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who sold off their full holdings last quarter. Intriguingly, Nicolai Tangen’s Ako Capital cut the largest position of the 750 funds watched by Insider Monkey, comprising an estimated $142.1 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also sold off its stock, about $17 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Edwards Lifesciences Corporation (NYSE:EW) but similarly valued. We will take a look at Baxter International Inc. (NYSE:BAX), Itau Unibanco Holding SA (NYSE:ITUB), Biogen Inc. (NASDAQ:BIIB), The Charles Schwab Corporation (NYSE:SCHW), General Dynamics Corporation (NYSE:GD), Vodafone Group Plc (NASDAQ:VOD), and National Grid plc (NYSE:NGG). This group of stocks’ market valuations are closest to EW’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $2307 million. That figure was $1391 million in EW’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 2 bullish hedge fund positions. Edwards Lifesciences Corporation (NYSE:EW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EW is 59.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on EW as the stock returned 24.2% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.