The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small-cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small-cap stocks. In this article, we take a closer look at Cyberonics, Inc. (NASDAQ:CYBX) from the perspective of those funds.
Is Cyberonics, Inc. (NASDAQ:CYBX) undervalued? Hedge funds are getting less optimistic. The number of long hedge fund bets decreased by two in recent months. At the end of this article, we will also compare Cyberonics, Inc. (NASDAQ:CYBX) to other stocks including Argo Group International Holdings, Ltd. (NASDAQ:AGII), 21Vianet Group Inc (NASDAQ:VNET), and Galapagos NV (ADR) (NASDAQ:GLPG) to get a better sense of its popularity.
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In the financial world there are plenty of signals stock market investors use to grade their holdings. Some of the most useful signals are hedge fund and insider trading interest. our experts have shown that, historically, those who follow the best picks of the top investment managers can trounce their index-focused peers by a very impressive margin (see the details here).
Keeping this in mind, let’s analyze the key action regarding Cyberonics, Inc. (NASDAQ:CYBX).
What have hedge funds been doing with Cyberonics, Inc. (NASDAQ:CYBX)?
At the end of Q3, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 8% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the number one position in Cyberonics, Inc. (NASDAQ:CYBX). Renaissance Technologies has a $128.9 million position in the stock, comprising 0.3% of its 13F portfolio. The second-most bullish fund manager is Paulson & Co, managed by John Paulson, which holds a $117.5 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions encompass Stephen DuBois’ Camber Capital Management, Alex Duran and Scott Hendrickson’s Permian Investment Partners, and GLG Partners.
Seeing as Cyberonics, Inc. (NASDAQ:CYBX) has faced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds who sold off their entire stakes in the third quarter. Intriguingly, William Leland Edwards’ Palo Alto Investors cut the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $24.5 million in stock, and Jonathan Lourie and Stuart Fiertz of Cheyne Capital were right behind this move, as the fund managers dropped about $7.1 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest fell by two funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cyberonics, Inc. (NASDAQ:CYBX) but similarly valued. These stocks are Argo Group International Holdings, Ltd. (NASDAQ:AGII), 21Vianet Group Inc (NASDAQ:VNET), Galapagos NV (ADR) (NASDAQ:GLPG), and Commercial Metals Company (NYSE:CMC). This group of stocks’ market valuations are similar to Cyberonics, Inc. (NASDAQ:CYBX)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $434 million in Cyberonics, Inc. (NASDAQ:CYBX)’s case. Argo Group International Holdings, Ltd. (NASDAQ:AGII) is the most popular stock in this table. On the other hand, Galapagos NV (ADR) (NASDAQ:GLPG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Cyberonics, Inc. (NASDAQ:CYBX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.