At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 NuVasive, Inc. (NASDAQ:NUVA) at the end of the second quarter and determine whether the smart money was really smart about this stock.
NuVasive, Inc. (NASDAQ:NUVA) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. NUVA investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 24 hedge funds in our database with NUVA positions at the end of the first quarter. Our calculations also showed that NUVA 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar 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. Now let’s take a look at the fresh hedge fund action regarding NuVasive, Inc. (NASDAQ:NUVA).
How are hedge funds trading NuVasive, Inc. (NASDAQ:NUVA)?
At Q2’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in NUVA 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.
The largest stake in NuVasive, Inc. (NASDAQ:NUVA) was held by Citadel Investment Group, which reported holding $95.9 million worth of stock at the end of September. It was followed by Deerfield Management with a $93.1 million position. Other investors bullish on the company included Fisher Asset Management, Healthcor Management LP, and Millennium Management. In terms of the portfolio weights assigned to each position Deerfield Management allocated the biggest weight to NuVasive, Inc. (NASDAQ:NUVA), around 2.71% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, designating 2.26 percent of its 13F equity portfolio to NUVA.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, initiated the biggest position in NuVasive, Inc. (NASDAQ:NUVA). Healthcor Management LP had $54 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $26 million investment in the stock during the quarter. The following funds were also among the new NUVA investors: Brandon Haley’s Holocene Advisors, Bhagwan Jay Rao’s Integral Health Asset Management, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks similar to NuVasive, Inc. (NASDAQ:NUVA). We will take a look at Shift4 Payments, Inc. (NYSE:FOUR), Univar Solutions Inc (NYSE:UNVR), National Beverage Corp. (NASDAQ:FIZZ), Corporate Office Properties Trust (NYSE:OFC), Blackbaud, Inc. (NASDAQ:BLKB), ALLETE Inc (NYSE:ALE), and AAON, Inc. (NASDAQ:AAON). This group of stocks’ market caps resemble NUVA’s market cap.
|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 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $485 million in NUVA’s case. Univar Solutions Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Shift4 Payments, Inc. (NYSE:FOUR) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks NuVasive, Inc. (NASDAQ:NUVA) is more popular among hedge funds. Our overall hedge fund sentiment score for NUVA is 86.8. 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. Unfortunately NUVA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NUVA were disappointed as the stock returned -6.3% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.