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

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Invacare Corporation (NYSE:IVC) .

Is Invacare Corporation (NYSE:IVC) ready to rally soon? Investors who are in the know are taking a bullish view. The number of long hedge fund positions rose by 1 in recent months. IVC was in 15 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with IVC holdings at the end of the previous quarter. At the end of this article we will also compare IVC to other stocks including Medifast, Inc. (NYSE:MED), Western Asset Mortgage Capital Corp (NYSE:WMC), and First Community Bancshares Inc (NASDAQ:FCBC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 7% gain from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in IVC at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Daruma Asset Management, led by Mariko Gordon, holds the most valuable position in Invacare Corporation (NYSE:IVC). Daruma Asset Management has a $33.3 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, founded by Israel Englander, holds a $16.1 million position. Other peers that hold long positions contain Chuck Royce’s Royce & Associates, D. E. Shaw’s D E Shaw and Efrem Kamen’s Pura Vida Investments. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, specific money managers were breaking ground themselves. Citadel Investment Group, led by Ken Griffin, established the most outsized position in Invacare Corporation (NYSE:IVC). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Joseph Edelman’s Perceptive Advisors.

Let’s now review hedge fund activity in other stocks similar to Invacare Corporation (NYSE:IVC). We will take a look at Medifast, Inc. (NYSE:MED), Western Asset Mortgage Capital Corp (NYSE:WMC), First Community Bancshares Inc (NASDAQ:FCBC), and Lion Biotechnologies Inc (NASDAQ:LBIO). All of these stocks’ market caps match IVC’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $79 million in IVC’s case. Lion Biotechnologies Inc (NASDAQ:LBIO) is the most popular stock in this table. On the other hand First Community Bancshares Inc (NASDAQ:FCBC) is the least popular one with only 4 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LBIO might be a better candidate to consider taking a long position in.

Disclosure: None