Is IVC A Good Stock To Buy Now?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Invacare Corporation (NYSE:IVC).

Is IVC a good stock to buy now? Invacare Corporation (NYSE:IVC) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 21. IVC investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 18 hedge funds in our database with IVC positions at the end of the second quarter. 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 for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several gauges market participants use to assess their stock investments. A couple of the most under-the-radar gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best fund managers can beat their index-focused peers by a solid amount (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s view the latest hedge fund action encompassing Invacare Corporation (NYSE:IVC).

Do Hedge Funds Think IVC Is A Good Stock To Buy Now?

At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in IVC a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Invacare Corporation (NYSE:IVC), which was worth $16.9 million at the end of the third quarter. On the second spot was Pura Vida Investments which amassed $12.6 million worth of shares. Royce & Associates, Millennium Management, and North Run 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 North Run Capital allocated the biggest weight to Invacare Corporation (NYSE:IVC), around 3.76% of its 13F portfolio. Plaisance Capital is also relatively very bullish on the stock, setting aside 1.59 percent of its 13F equity portfolio to IVC.

Seeing as Invacare Corporation (NYSE:IVC) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that slashed their entire stakes last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group said goodbye to the largest stake of all the hedgies followed by Insider Monkey, totaling about $6 million in stock. Howard Marks’s fund, Oaktree Capital Management, also sold off its stock, about $2.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Invacare Corporation (NYSE:IVC) but similarly valued. We will take a look at BBX Capital Corporation (NYSE:BBX), CECO Environmental Corp. (NASDAQ:CECE), RADA Electronic Industries Ltd. (NASDAQ:RADA), GasLog Ltd (NYSE:GLOG), Citizens & Northern Corporation (NASDAQ:CZNC), Uxin Limited (NASDAQ:UXIN), and Tellurian Inc. (NASDAQ:TELL). 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
BBX 9 17576 -2
CECE 10 48633 2
RADA 7 16874 0
GLOG 7 6550 -6
CZNC 4 3884 2
UXIN 5 2779 3
TELL 3 2596 -1
Average 6.4 14127 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $60 million in IVC’s case. CECO Environmental Corp. (NASDAQ:CECE) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Invacare Corporation (NYSE:IVC) is more popular among hedge funds. Our overall hedge fund sentiment score for IVC is 78.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on IVC as the stock returned 20.7% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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