In this article we will check out the progression of hedge fund sentiment towards NuVasive, Inc. (NASDAQ:NUVA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is NuVasive, Inc. (NASDAQ:NUVA) the right pick for your portfolio? Hedge funds were in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 5 recently. NuVasive, Inc. (NASDAQ:NUVA) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 37. Our calculations also showed that NUVA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 25 hedge funds in our database with NUVA positions at the end of the fourth quarter.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a glance at the latest hedge fund action encompassing NuVasive, Inc. (NASDAQ:NUVA).
Do Hedge Funds Think NUVA Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% 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. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, David Paradice’s Paradice Investment Management has the biggest position in NuVasive, Inc. (NASDAQ:NUVA), worth close to $61.1 million, corresponding to 2.9% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $58 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Steven Boyd’s Armistice Capital, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to NuVasive, Inc. (NASDAQ:NUVA), around 2.94% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 1.21 percent of its 13F equity portfolio to NUVA.
Seeing as NuVasive, Inc. (NASDAQ:NUVA) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that decided to sell off their positions entirely last quarter. It’s worth mentioning that James E. Flynn’s Deerfield Management said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, worth an estimated $201.3 million in stock. D. E. Shaw’s fund, D E Shaw, also cut its stock, about $32.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NuVasive, Inc. (NASDAQ:NUVA) but similarly valued. We will take a look at Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Revolution Medicines, Inc. (NASDAQ:RVMD), Mercury General Corporation (NYSE:MCY), Proto Labs Inc (NYSE:PRLB), Atkore Inc. (NYSE:ATKR), Insight Enterprises, Inc. (NASDAQ:NSIT), and PagerDuty, Inc. (NYSE:PD). All of these stocks’ market caps are closest to 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 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $370 million. That figure was $272 million in NUVA’s case. Revolution Medicines, Inc. (NASDAQ:RVMD) is the most popular stock in this table. On the other hand Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is the least popular one with only 16 bullish hedge fund positions. NuVasive, Inc. (NASDAQ:NUVA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NUVA is 36.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately NUVA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NUVA investors were disappointed as the stock returned -2.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
- 10 Best Cryptocurrency Exchanges in 2020
- 10 Best High Yield Dividend Stocks to Buy in June
- Top 15 Online Shopping Websites in 2020
Disclosure: None. This article was originally published at Insider Monkey.