Hedge Funds Are Dumping ShockWave Medical, Inc. (SWAV)

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 write-ups 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 and analyze what the smart money thinks of ShockWave Medical, Inc. (NASDAQ:SWAV) based on that data.

ShockWave Medical, Inc. (NASDAQ:SWAV) was in 7 hedge funds’ portfolios at the end of the second quarter of 2019. SWAV investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 14 hedge funds in our database with SWAV positions at the end of the previous quarter. Our calculations also showed that SWAV 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.

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 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.

Peter Kolchinsky

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 go over the latest hedge fund action surrounding ShockWave Medical, Inc. (NASDAQ:SWAV).

How have hedgies been trading ShockWave Medical, Inc. (NASDAQ:SWAV)?

At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in SWAV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SWAV Positions

More specifically, Sectoral Asset Management was the largest shareholder of ShockWave Medical, Inc. (NASDAQ:SWAV), with a stake worth $48.5 million reported as of the end of March. Trailing Sectoral Asset Management was RA Capital Management, which amassed a stake valued at $28.3 million. Deerfield Management, Perceptive Advisors, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Because ShockWave Medical, Inc. (NASDAQ:SWAV) has experienced declining sentiment from hedge fund managers, it’s easy to see that there were a few funds who were dropping their positions entirely last quarter. Intriguingly, Jeremy Green’s Redmile Group dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $10 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund said goodbye to about $6.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to ShockWave Medical, Inc. (NASDAQ:SWAV). We will take a look at SFL Corporation Ltd. (NYSE:SFL), CareDx, Inc. (NASDAQ:CDNA), HNI Corporation (NYSE:HNI), and Cardiovascular Systems Inc (NASDAQ:CSII). This group of stocks’ market caps are similar to SWAV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFL 11 36180 5
CDNA 24 169840 -1
HNI 14 49052 -4
CSII 17 117103 -1
Average 16.5 93044 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $112 million in SWAV’s case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand SFL Corporation Ltd. (NYSE:SFL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks ShockWave Medical, Inc. (NASDAQ:SWAV) is even less popular than SFL. Hedge funds dodged a bullet by taking a bearish stance towards SWAV. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SWAV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SWAV investors were disappointed as the stock returned -47.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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