Is Natus Medical Inc (NTUS) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Natus Medical Inc (NASDAQ:NTUS) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Natus Medical Inc (NASDAQ:NTUS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NTUS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare NTUS to other stocks including GAN Limited (NASDAQ:GAN), Oxford Industries, Inc. (NYSE:OXM), and Magnite Inc. (NASDAQ:MGNI) to get a better sense of its popularity.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let’s take a gander at the new hedge fund action surrounding Natus Medical Inc (NASDAQ:NTUS).

How are hedge funds trading Natus Medical Inc (NASDAQ:NTUS)?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NTUS over the last 20 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Natus Medical Inc (NASDAQ:NTUS), which was worth $17.3 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $12.2 million worth of shares. Fisher Asset Management, Diamond Hill Capital, and Arrowstreet 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 Rutabaga Capital Management allocated the biggest weight to Natus Medical Inc (NASDAQ:NTUS), around 2.3% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, designating 2.05 percent of its 13F equity portfolio to NTUS.

Seeing as Natus Medical Inc (NASDAQ:NTUS) has experienced bearish sentiment from hedge fund managers, we can see that there were a few hedgies that elected to cut their full holdings last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $2.5 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Natus Medical Inc (NASDAQ:NTUS). We will take a look at GAN Limited (NASDAQ:GAN), Oxford Industries, Inc. (NYSE:OXM), Magnite Inc. (NASDAQ:MGNI), Photronics, Inc. (NASDAQ:PLAB), First Foundation Inc (NASDAQ:FFWM), First Bancorp (NASDAQ:FBNC), and Fusion Pharmaceuticals Inc. (NASDAQ:FUSN). All of these stocks’ market caps are closest to NTUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GAN 11 40359 11
OXM 12 35595 0
MGNI 24 135641 2
PLAB 21 86972 -1
FFWM 14 54824 2
FBNC 17 43126 4
FUSN 19 218977 19
Average 16.9 87928 5.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $85 million in NTUS’s case. Magnite Inc. (NASDAQ:MGNI) is the most popular stock in this table. On the other hand GAN Limited (NASDAQ:GAN) is the least popular one with only 11 bullish hedge fund positions. Natus Medical Inc (NASDAQ:NTUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTUS is 79.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately NTUS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NTUS were disappointed as the stock returned -21.5% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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