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Hedge Funds Have Never Been This Bullish On Nevro Corp (NVRO)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Nevro Corp (NYSE:NVRO) and determine whether the smart money was really smart about this stock.

Is Nevro Corp (NYSE:NVRO) an outstanding investment right now? The best stock pickers were taking an optimistic view. The number of long hedge fund bets increased by 4 in recent months. Nevro Corp (NYSE:NVRO) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NVRO 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.

Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 peek at the recent hedge fund action surrounding Nevro Corp (NYSE:NVRO).

What does smart money think about Nevro Corp (NYSE:NVRO)?

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in NVRO a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is NVRO A Good Stock To Buy?

The largest stake in Nevro Corp (NYSE:NVRO) was held by D E Shaw, which reported holding $150.7 million worth of stock at the end of September. It was followed by Healthcor Management LP with a $125.9 million position. Other investors bullish on the company included Perceptive Advisors, Redmile Group, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Tiger Eye Capital allocated the biggest weight to Nevro Corp (NYSE:NVRO), around 5.46% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, earmarking 5.28 percent of its 13F equity portfolio to NVRO.

As one would reasonably expect, key hedge funds were breaking ground themselves. Tiger Eye Capital, managed by Ben Gambill, created the most valuable position in Nevro Corp (NYSE:NVRO). Tiger Eye Capital had $23 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $14.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Christopher James’s Partner Fund Management, Krishen Sud’s Sivik Global Healthcare, and Guy Levy’s Soleus Capital.

Let’s also examine hedge fund activity in other stocks similar to Nevro Corp (NYSE:NVRO). We will take a look at Cameco Corporation (NYSE:CCJ), Cabot Microelectronics Corporation (NASDAQ:CCMP), Qualys Inc (NASDAQ:QLYS), MSC Industrial Direct Co Inc (NYSE:MSM), Grupo Aeroportuario del Pacifico (NYSE:PAC), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and TFS Financial Corporation (NASDAQ:TFSL). All of these stocks’ market caps are closest to NVRO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCJ 22 321965 -2
CCMP 23 163401 7
QLYS 27 168061 10
MSM 30 389200 7
PAC 7 103052 2
IOVA 43 1341814 4
TFSL 11 122677 2
Average 23.3 372881 4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $757 million in NVRO’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 7 bullish hedge fund positions. Nevro Corp (NYSE:NVRO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVRO is 77.9. 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 NVRO, though not to the same extent, as the stock returned 15.1% since the end of June and outperformed the market as well.

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