Is Natus Medical Inc (NTUS) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Natus Medical Inc (NASDAQ:NTUS) to find out whether there were any major changes in hedge funds’ views.

Is NTUS a good stock to buy? The best stock pickers were selling. The number of long hedge fund bets shrunk by 3 recently. Natus Medical Inc (NASDAQ:NTUS) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that NTUS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Today there are many signals stock market investors employ to evaluate their holdings. A duo of the most useful signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top investment managers can outclass the S&P 500 by a very impressive amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Roger Ibbotson of Zebra Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let’s review the recent hedge fund action encompassing Natus Medical Inc (NASDAQ:NTUS).

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

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NTUS over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Natus Medical Inc (NASDAQ:NTUS), with a stake worth $15.2 million reported as of the end of March. Trailing Renaissance Technologies was Impax Asset Management, which amassed a stake valued at $12.1 million. Arrowstreet Capital, Diamond Hill Capital, and Fisher Asset Management 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 Rutabaga Capital Management allocated the biggest weight to Natus Medical Inc (NASDAQ:NTUS), around 1.37% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, designating 0.88 percent of its 13F equity portfolio to NTUS.

Seeing as Natus Medical Inc (NASDAQ:NTUS) has faced bearish sentiment from the smart money, logic holds that there exists a select few hedgies who sold off their positions entirely in the first quarter. Interestingly, Michael Gelband’s ExodusPoint Capital sold off the largest position of all the hedgies tracked by Insider Monkey, worth close to $1.9 million in stock, and Ali Motamed’s Invenomic Capital Management was right behind this move, as the fund dumped about $1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Natus Medical Inc (NASDAQ:NTUS). These stocks are State Auto Financial Corporation (NASDAQ:STFC), Bioventus Inc. (NASDAQ:BVS), Aligos Therapeutics, Inc. (NASDAQ:ALGS), Neenah Inc. (NYSE:NP), Vital Farms, Inc. (NASDAQ:VITL), Cellectis SA (NASDAQ:CLLS), and The Gorman-Rupp Company (NYSE:GRC). This group of stocks’ market values are similar to NTUS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STFC 8 9274 0
BVS 12 110175 12
ALGS 8 207663 -3
NP 12 22440 6
VITL 9 27182 0
CLLS 8 112218 2
GRC 8 28320 -1
Average 9.3 73896 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $90 million in NTUS’s case. Bioventus Inc. (NASDAQ:BVS) is the most popular stock in this table. On the other hand State Auto Financial Corporation (NASDAQ:STFC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Natus Medical Inc (NASDAQ:NTUS) is more popular among hedge funds. Our overall hedge fund sentiment score for NTUS is 77. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately NTUS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NTUS were disappointed as the stock returned -6.1% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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