“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards NuVasive, Inc. (NASDAQ:NUVA) and see how it was affected.
NuVasive, Inc. (NASDAQ:NUVA) has experienced a decrease in hedge fund interest of late. NUVA was in 21 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with NUVA positions at the end of the previous quarter. Our calculations also showed that NUVA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of formulas investors put to use to size up their stock investments. Some of the most useful formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a solid amount (see the details here).
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the key hedge fund action surrounding NuVasive, Inc. (NASDAQ:NUVA).
What have hedge funds been doing with NuVasive, Inc. (NASDAQ:NUVA)?
Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NUVA over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in NuVasive, Inc. (NASDAQ:NUVA) was held by Eminence Capital, which reported holding $72.4 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $71.5 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Healthcor Management. In terms of the portfolio weights assigned to each position Eminence Capital allocated the biggest weight to NuVasive, Inc. (NASDAQ:NUVA), around 0.87% of its 13F portfolio. Healthcor Management is also relatively very bullish on the stock, earmarking 0.72 percent of its 13F equity portfolio to NUVA.
Since NuVasive, Inc. (NASDAQ:NUVA) has experienced bearish sentiment from the smart money, it’s easy to see that there exists a select few fund managers who sold off their full holdings by the end of the third quarter. It’s worth mentioning that James Dinan’s York Capital Management dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $15.8 million in stock. Clint Carlson’s fund, Carlson Capital, also cut its stock, about $9.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NuVasive, Inc. (NASDAQ:NUVA) but similarly valued. These stocks are Companhia Paranaense de Energia – COPEL (NYSE:ELP), Physicians Realty Trust (NYSE:DOC), Parsons Corporation (NYSE:PSN), and Hancock Whitney Corporation (NASDAQ:HWC). This group of stocks’ market caps are closest to NUVA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $253 million in NUVA’s case. Hancock Whitney Corporation (NASDAQ:HWC) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia – COPEL (NYSE:ELP) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks NuVasive, Inc. (NASDAQ:NUVA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NUVA as the stock returned 14% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.