Is Cardiovascular Systems Inc (CSII) A Good Stock To Buy ?

Is Cardiovascular Systems Inc (NASDAQ:CSII) a good equity to bet on 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.

Is Cardiovascular Systems Inc (NASDAQ:CSII) a buy right now? Hedge funds are getting less optimistic. The number of bullish hedge fund bets retreated by 1 lately. Our calculations also showed that CSII isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the new hedge fund action surrounding Cardiovascular Systems Inc (NASDAQ:CSII).

What does smart money think about Cardiovascular Systems Inc (NASDAQ:CSII)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CSII over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds with CSII Positions

More specifically, Renaissance Technologies was the largest shareholder of Cardiovascular Systems Inc (NASDAQ:CSII), with a stake worth $50.7 million reported as of the end of March. Trailing Renaissance Technologies was Partner Fund Management, which amassed a stake valued at $18.3 million. D E Shaw, Balyasny Asset Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Cardiovascular Systems Inc (NASDAQ:CSII) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers who sold off their full holdings heading into Q3. It’s worth mentioning that Peter Muller’s PDT Partners sold off the biggest investment of the 750 funds followed by Insider Monkey, worth close to $0.9 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund cut about $0.7 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

Let’s go over hedge fund activity in other stocks similar to Cardiovascular Systems Inc (NASDAQ:CSII). We will take a look at Edgewell Personal Care Company (NYSE:EPC), Rent-A-Center Inc (NASDAQ:RCII), Stratasys, Ltd. (NASDAQ:SSYS), and Actuant Corporation (NYSE:ATU). All of these stocks’ market caps are similar to CSII’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPC 25 215610 6
RCII 18 415518 -3
SSYS 16 176378 2
ATU 12 287386 3
Average 17.75 273723 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $117 million in CSII’s case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Actuant Corporation (NYSE:ATU) is the least popular one with only 12 bullish hedge fund positions. Cardiovascular Systems Inc (NASDAQ:CSII) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CSII as the stock returned 10.7% during the same time frame and outperformed the market by an even larger margin.

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