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Hedge Funds Are Selling ABIOMED, Inc. (ABMD)

Does ABIOMED, Inc. (NASDAQ:ABMD) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

ABIOMED, Inc. (NASDAQ:ABMD) was in 21 hedge funds’ portfolios at the end of September. ABMD investors should pay attention to a decrease in hedge fund interest recently. There were 28 hedge funds in our database with ABMD positions at the end of the previous quarter. Our calculations also showed that ABMD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. 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

William Leland Edwards of Palo Alto Investors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the latest hedge fund action regarding ABIOMED, Inc. (NASDAQ:ABMD).

How have hedgies been trading ABIOMED, Inc. (NASDAQ:ABMD)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in ABMD 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.

Among these funds, Renaissance Technologies held the most valuable stake in ABIOMED, Inc. (NASDAQ:ABMD), which was worth $379.9 million at the end of the third quarter. On the second spot was Palo Alto Investors which amassed $116.4 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and D E Shaw 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 Palo Alto Investors allocated the biggest weight to ABIOMED, Inc. (NASDAQ:ABMD), around 7.75% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, earmarking 1.66 percent of its 13F equity portfolio to ABMD.

Due to the fact that ABIOMED, Inc. (NASDAQ:ABMD) has faced falling interest from the smart money, we can see that there lies a certain “tier” of funds that elected to cut their full holdings in the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $17.4 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also cut its stock, about $9.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 7 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to ABIOMED, Inc. (NASDAQ:ABMD). We will take a look at Pool Corporation (NASDAQ:POOL), Vedanta Ltd (NYSE:VEDL), Bunge Limited (NYSE:BG), and Zayo Group Holdings Inc (NYSE:ZAYO). This group of stocks’ market caps are similar to ABMD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POOL 26 402099 4
VEDL 10 55913 2
BG 34 579574 3
ZAYO 50 1997124 -9
Average 30 758678 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $759 million. That figure was $581 million in ABMD’s case. Zayo Group Holdings Inc (NYSE:ZAYO) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 10 bullish hedge fund positions. ABIOMED, Inc. (NASDAQ:ABMD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ABMD, though not to the same extent, as the stock returned 10.3% during the first two months of the fourth quarter and outperformed the market.

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

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