Is STAA A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to STAAR Surgical Company (NASDAQ:STAA) changed recently.

Is STAA a good stock to buy now? Hedge funds were in a pessimistic mood. The number of long hedge fund bets shrunk by 7 recently. STAAR Surgical Company (NASDAQ:STAA) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that STAA 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). There were 20 hedge funds in our database with STAA holdings at the end of June.

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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 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 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. Now we’re going to check out the fresh hedge fund action encompassing STAAR Surgical Company (NASDAQ:STAA).

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

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in STAA over the last 21 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is STAA A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Broadwood Capital, managed by Neal C. Bradsher, holds the number one position in STAAR Surgical Company (NASDAQ:STAA). Broadwood Capital has a $610.6 million position in the stock, comprising 48% of its 13F portfolio. On Broadwood Capital’s heels is William Leland Edwards of Palo Alto Investors, with a $157.9 million position; 8.7% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish contain Efrem Kamen’s Pura Vida Investments, Chuck Royce’s Royce & Associates and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to STAAR Surgical Company (NASDAQ:STAA), around 48.01% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, earmarking 8.67 percent of its 13F equity portfolio to STAA.

Due to the fact that STAAR Surgical Company (NASDAQ:STAA) has witnessed a decline in interest from hedge fund managers, we can see that there was a specific group of hedge funds that slashed their positions entirely in the third quarter. Interestingly, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $8 million in stock, and Josh Resnick’s Jericho Capital Asset Management was right behind this move, as the fund dropped about $7.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 7 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as STAAR Surgical Company (NASDAQ:STAA) but similarly valued. We will take a look at WD-40 Company (NASDAQ:WDFC), Sunnova Energy International Inc. (NYSE:NOVA), Tenet Healthcare Corp (NYSE:THC), ShockWave Medical, Inc. (NASDAQ:SWAV), Nu Skin Enterprises, Inc. (NYSE:NUS), Tegna Inc (NYSE:TGNA), and Pacira Biosciences Inc (NASDAQ:PCRX). All of these stocks’ market caps are closest to STAA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WDFC 17 163003 2
NOVA 23 422856 13
THC 33 791683 5
SWAV 16 135654 4
NUS 22 315274 -3
TGNA 27 285889 -2
PCRX 25 519535 -4
Average 23.3 376271 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $376 million. That figure was $827 million in STAA’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand ShockWave Medical, Inc. (NASDAQ:SWAV) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks STAAR Surgical Company (NASDAQ:STAA) is even less popular than SWAV. Our overall hedge fund sentiment score for STAA is 14.3. 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. Hedge funds clearly dropped the ball on STAA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on STAA as the stock returned 43.1% since Q3 (through December 8th) and outperformed the market by an even larger margin.

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