How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Envista Holdings Corporation (NYSE:NVST) and determine whether hedge funds had an edge regarding this stock.
Envista Holdings Corporation (NYSE:NVST) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Envista Holdings Corporation (NYSE:NVST) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 42. Our calculations also showed that NVST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Jeffrey Gates of Gates Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Envista Holdings Corporation (NYSE:NVST).
Do Hedge Funds Think NVST Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2021. On the other hand, there were a total of 20 hedge funds with a bullish position in NVST a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ariel Investments held the most valuable stake in Envista Holdings Corporation (NYSE:NVST), which was worth $254.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $134.3 million worth of shares. Paradice Investment Management, Healthcor Management LP, and Polar Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Envista Holdings Corporation (NYSE:NVST), around 8.81% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, earmarking 4.69 percent of its 13F equity portfolio to NVST.
Because Envista Holdings Corporation (NYSE:NVST) has faced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedgies who sold off their entire stakes in the third quarter. Interestingly, Israel Englander’s Millennium Management cut the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $15.1 million in stock. Franklin Parlamis’s fund, Aequim Alternative Investments, also sold off its stock, about $10.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Envista Holdings Corporation (NYSE:NVST). These stocks are American Campus Communities, Inc. (NYSE:ACC), Eastgroup Properties Inc (NYSE:EGP), Toll Brothers Inc (NYSE:TOL), First Industrial Realty Trust, Inc. (NYSE:FR), Euronet Worldwide, Inc. (NASDAQ:EEFT), ADT Inc. (NYSE:ADT), and Marriott Vacations Worldwide Corporation (NYSE:VAC). This group of stocks’ market caps resemble NVST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACC | 17 | 147769 | -4 |
| EGP | 13 | 200703 | 2 |
| TOL | 31 | 705647 | -1 |
| FR | 25 | 252097 | 3 |
| EEFT | 38 | 379793 | -2 |
| ADT | 18 | 335536 | -3 |
| VAC | 23 | 751056 | -12 |
| Average | 23.6 | 396086 | -2.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $1073 million in NVST’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 13 bullish hedge fund positions. Envista Holdings Corporation (NYSE:NVST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVST is 63.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on NVST as the stock returned 3.4% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow Envista Holdings Corp (NYSE:NVST)
Follow Envista Holdings Corp (NYSE:NVST)
Suggested Articles:
- 10 Best Penny Stocks To Buy Now
- Best Stocks To Buy For Early Retirement
- Billionaire David Abrams’ Top Stock Picks
Disclosure: None. This article was originally published at Insider Monkey.
