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Hedge Funds Were Getting Burned By LivaNova PLC (LIVN) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about LivaNova PLC (NASDAQ:LIVN).

LivaNova PLC (NASDAQ:LIVN) shareholders have witnessed an increase in hedge fund interest in recent months. LIVN was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with LIVN positions at the end of the previous quarter. Our calculations also showed that LIVN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the eyes of most shareholders, hedge funds are perceived as slow, old investment vehicles of years past. While there are over 8000 funds trading at present, We choose to focus on the top tier of this group, about 850 funds. These investment experts watch over most of the smart money’s total capital, and by observing their matchless investments, Insider Monkey has figured out a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

BRIDGER MANAGEMENT

Roberto Mignone of Bridger Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action regarding LivaNova PLC (NASDAQ:LIVN).

What does smart money think about LivaNova PLC (NASDAQ:LIVN)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in LIVN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Paradice’s Paradice Investment Management has the number one position in LivaNova PLC (NASDAQ:LIVN), worth close to $49.4 million, corresponding to 3.4% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $48.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass Roberto Mignone’s Bridger Management, Jeremy Hosking’s Hosking Partners and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to LivaNova PLC (NASDAQ:LIVN), around 3.44% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, dishing out 2.76 percent of its 13F equity portfolio to LIVN.

As one would reasonably expect, specific money managers have been driving this bullishness. Bridger Management, managed by Roberto Mignone, established the most outsized position in LivaNova PLC (NASDAQ:LIVN). Bridger Management had $38.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $4.8 million position during the quarter. The other funds with brand new LIVN positions are Steve Cohen’s Point72 Asset Management, Jinghua Yan’s TwinBeech Capital, and Minhua Zhang’s Weld Capital Management.

Let’s also examine hedge fund activity in other stocks similar to LivaNova PLC (NASDAQ:LIVN). These stocks are Nevro Corp (NYSE:NVRO), Apple Hospitality REIT Inc (NYSE:APLE), Terreno Realty Corporation (NYSE:TRNO), and Tegna Inc (NYSE:TGNA). All of these stocks’ market caps are closest to LIVN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVRO 33 961499 11
APLE 15 135141 0
TRNO 14 32370 3
TGNA 19 400244 1
Average 20.25 382314 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $196 million in LIVN’s case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 14 bullish hedge fund positions. LivaNova PLC (NASDAQ:LIVN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately LIVN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LIVN were disappointed as the stock returned -45.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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