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Is Invacare Corporation (IVC) Going to Burn These Hedge Funds?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Invacare Corporation (NYSE:IVC) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Invacare Corporation (NYSE:IVC) has experienced a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that IVC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the key hedge fund action regarding Invacare Corporation (NYSE:IVC).

How are hedge funds trading Invacare Corporation (NYSE:IVC)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IVC over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is IVAC A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Invacare Corporation (NYSE:IVC). Millennium Management has a $19 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $15.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Renaissance Technologies, Efrem Kamen’s Pura Vida Investments and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Invacare Corporation (NYSE:IVC), around 2.68% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 2.15 percent of its 13F equity portfolio to IVC.

Because Invacare Corporation (NYSE:IVC) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds that slashed their entire stakes heading into Q4. It’s worth mentioning that Mark Kleiman’s Factorial Partners said goodbye to the largest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $0.1 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Invacare Corporation (NYSE:IVC) but similarly valued. These stocks are Assembly Biosciences Inc (NASDAQ:ASMB), Landcadia Holdings, Inc. (NASDAQ:LCAHU), Tiptree Inc. (NASDAQ:TIPT), and TETRA Technologies, Inc. (NYSE:TTI). All of these stocks’ market caps match IVC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ASMB 16 64291 -2
LCAHU 20 85875 2
TIPT 2 1509 -2
TTI 9 14845 0
Average 11.75 41630 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $68 million in IVC’s case. Landcadia Holdings, Inc. (NASDAQ:LCAHU) is the most popular stock in this table. On the other hand Tiptree Inc. (NASDAQ:TIPT) is the least popular one with only 2 bullish hedge fund positions. Invacare Corporation (NYSE:IVC) is not the most popular stock in this group but hedge fund interest is still above average. 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 IVC as the stock returned 16.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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