Is SWAV A Good Stock To Buy Now?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ShockWave Medical, Inc. (NASDAQ:SWAV).

Is SWAV a good stock to buy now? ShockWave Medical, Inc. (NASDAQ:SWAV) investors should pay attention to an increase in enthusiasm from smart money lately. ShockWave Medical, Inc. (NASDAQ:SWAV) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 12 hedge funds in our database with SWAV holdings at the end of June. Our calculations also showed that SWAV 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.

In the 21st century investor’s toolkit there are plenty of tools stock market investors put to use to analyze publicly traded companies. Some of the less utilized tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat their index-focused peers by a solid amount (see the details here).

Brad Farber Atika Capital

Brad Farber of Atika 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. Keeping this in mind let’s review the key hedge fund action surrounding ShockWave Medical, Inc. (NASDAQ:SWAV).

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

Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SWAV over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the biggest position in ShockWave Medical, Inc. (NASDAQ:SWAV). Point72 Asset Management has a $53.1 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is D E Shaw, led by D. E. Shaw, holding a $21.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Ken Griffin’s Citadel Investment Group and Brad Farber’s Atika Capital. In terms of the portfolio weights assigned to each position Atika Capital allocated the biggest weight to ShockWave Medical, Inc. (NASDAQ:SWAV), around 0.73% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, designating 0.58 percent of its 13F equity portfolio to SWAV.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Atika Capital, managed by Brad Farber, assembled the most outsized position in ShockWave Medical, Inc. (NASDAQ:SWAV). Atika Capital had $8.9 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $6.8 million investment in the stock during the quarter. The other funds with brand new SWAV positions are Bhagwan Jay Rao’s Integral Health Asset Management, Greg Eisner’s Engineers Gate Manager, and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ShockWave Medical, Inc. (NASDAQ:SWAV) but similarly valued. We will take a look at Nu Skin Enterprises, Inc. (NYSE:NUS), Tegna Inc (NYSE:TGNA), Pacira Biosciences Inc (NASDAQ:PCRX), Cleveland-Cliffs Inc (NYSE:CLF), Antero Midstream Corp (NYSE:AM), BlackBerry Limited (NYSE:BB), and Burning Rock Biotech Limited (NASDAQ:BNR). This group of stocks’ market caps resemble SWAV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NUS 22 315274 -3
TGNA 27 285889 -2
PCRX 25 519535 -4
CLF 22 314755 -3
AM 19 137564 5
BB 24 320931 2
BNR 11 211903 -7
Average 21.4 300836 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $136 million in SWAV’s case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 11 bullish hedge fund positions. ShockWave Medical, Inc. (NASDAQ:SWAV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SWAV is 54.6. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on SWAV as the stock returned 23.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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