Invacare Corporation (IVC): Hedge Funds Are Getting Interested

In this article you are going to find out whether hedge funds think Invacare Corporation (NYSE:IVC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Invacare Corporation (NYSE:IVC) has seen an increase in enthusiasm from smart money in recent months. Our calculations also showed that IVC 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding Invacare Corporation (NYSE:IVC).

How have hedgies been trading Invacare Corporation (NYSE:IVC)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IVC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is IVC A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Invacare Corporation (NYSE:IVC), which was worth $17.4 million at the end of the third quarter. On the second spot was Pura Vida Investments which amassed $11.9 million worth of shares. Royce & Associates, Millennium Management, and D E Shaw 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 Pura Vida Investments allocated the biggest weight to Invacare Corporation (NYSE:IVC), around 3.04% of its 13F portfolio. North Run Capital is also relatively very bullish on the stock, designating 1.59 percent of its 13F equity portfolio to IVC.

As industrywide interest jumped, key hedge funds have jumped into Invacare Corporation (NYSE:IVC) headfirst. ExodusPoint Capital, managed by Michael Gelband, assembled the biggest position in Invacare Corporation (NYSE:IVC). ExodusPoint Capital had $0.3 million invested in the company at the end of the quarter. J. Daniel Plants’s Voce Capital also made a $0.1 million investment in the stock during the quarter. The following funds were also among the new IVC investors: Greg Eisner’s Engineers Gate Manager, Noam Gottesman’s GLG Partners, and Joel Greenblatt’s Gotham Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to Invacare Corporation (NYSE:IVC). We will take a look at Diamond Offshore Drilling Inc (NYSE:DO), Seres Therapeutics Inc (NASDAQ:MCRB), Ellington Financial Inc. (NYSE:EFC), and ProPetro Holding Corp. (NYSE:PUMP). This group of stocks’ market values are similar to IVC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DO 10 30889 -6
MCRB 4 6070 -1
EFC 11 20301 -1
PUMP 13 31997 -10
Average 9.5 22314 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $62 million in IVC’s case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand Seres Therapeutics Inc (NASDAQ:MCRB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Invacare Corporation (NYSE:IVC) is more popular among hedge funds. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately IVC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on IVC were disappointed as the stock returned -11.8% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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