Here is What Hedge Funds Think About Merit Medical Systems, Inc. (MMSI)

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Merit Medical Systems, Inc. (NASDAQ:MMSI).

Is Merit Medical Systems, Inc. (NASDAQ:MMSI) going to take off soon? Money managers are becoming more confident. The number of long hedge fund bets improved by 6 recently. Our calculations also showed that mmsi isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Chuck Royce

Let’s take a peek at the latest hedge fund action surrounding Merit Medical Systems, Inc. (NASDAQ:MMSI).

What have hedge funds been doing with Merit Medical Systems, Inc. (NASDAQ:MMSI)?

At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards MMSI over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With MMSI Positions

More specifically, Perceptive Advisors was the largest shareholder of Merit Medical Systems, Inc. (NASDAQ:MMSI), with a stake worth $52.2 million reported as of the end of September. Trailing Perceptive Advisors was Point72 Asset Management, which amassed a stake valued at $45.7 million. Partner Fund Management, Royce & Associates, and Fisher Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Merit Medical Systems, Inc. (NASDAQ:MMSI). Marshall Wace LLP had $12.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $6.7 million investment in the stock during the quarter. The following funds were also among the new MMSI investors: David Lohman’s Diag Capital, David Harding’s Winton Capital Management, and Brandon Haley’s Holocene Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Merit Medical Systems, Inc. (NASDAQ:MMSI) but similarly valued. We will take a look at Blackbaud, Inc. (NASDAQ:BLKB), Tech Data Corp (NASDAQ:TECD), Proto Labs Inc (NYSE:PRLB), and Aaron’s, Inc. (NYSE:AAN). This group of stocks’ market caps resemble MMSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLKB 13 57776 0
TECD 23 191630 3
PRLB 10 20643 5
AAN 21 186605 3
Average 16.75 114164 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $207 million in MMSI’s case. Tech Data Corp (NASDAQ:TECD) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 10 bullish hedge fund positions. Merit Medical Systems, Inc. (NASDAQ:MMSI) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MMSI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on MMSI were disappointed as the stock returned 3.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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