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Hedge Funds Not In The Mood To Take A Chance With ABIOMED, Inc. (ABMD)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of ABIOMED, Inc. (NASDAQ:ABMD) based on that data.

Is ABIOMED, Inc. (NASDAQ:ABMD) worth your attention right now? Prominent investors are getting less optimistic. The number of long hedge fund bets decreased by 8 recently. Our calculations also showed that ABMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the new hedge fund action surrounding ABIOMED, Inc. (NASDAQ:ABMD).

What does smart money think about ABIOMED, Inc. (NASDAQ:ABMD)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABMD over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is ABMD A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in ABIOMED, Inc. (NASDAQ:ABMD). Renaissance Technologies has a $297.3 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Palo Alto Investors, managed by William Leland Edwards, which holds a $73 million position; the fund has 6.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of James E. Flynn’s Deerfield Management, Jeffrey Jay and David Kroin’s Great Point Partners and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to ABIOMED, Inc. (NASDAQ:ABMD), around 6.11% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, designating 3.28 percent of its 13F equity portfolio to ABMD.

Seeing as ABIOMED, Inc. (NASDAQ:ABMD) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dropped the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $48.9 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $11 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to ABIOMED, Inc. (NASDAQ:ABMD). We will take a look at Zynga Inc (NASDAQ:ZNGA), F5 Networks, Inc. (NASDAQ:FFIV), Wynn Resorts, Limited (NASDAQ:WYNN), and Advance Auto Parts, Inc. (NYSE:AAP). All of these 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
ZNGA 59 1015313 11
FFIV 32 940064 3
WYNN 40 403164 -4
AAP 38 839686 -4
Average 42.25 799557 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $800 million. That figure was $523 million in ABMD’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand F5 Networks, Inc. (NASDAQ:FFIV) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks ABIOMED, Inc. (NASDAQ:ABMD) is even less popular than FFIV. Hedge funds clearly dropped the ball on ABMD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on ABMD as the stock returned 54.2% so far in the second quarter and outperformed the market by an even larger margin.

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