Should You Avoid Edwards Lifesciences Corp (EW)?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Edwards Lifesciences Corp (NYSE:EW) from the perspective of those elite funds.

Is Edwards Lifesciences Corp (NYSE:EW) a bargain? Hedge funds are in a pessimistic mood. The number of bullish hedge fund bets decreased by 5 lately. EW was in 38 hedge funds’ portfolios at the end of the third quarter of 2016. There were 43 hedge funds in our database with EW positions at the end of the previous quarter. At the end of this article we will also compare EW to other stocks including Synchrony Financial (NYSE:SYF), Apache Corporation (NYSE:APA), and Williams Partners L.P. (NYSE:WPZ) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to view the fresh action regarding Edwards Lifesciences Corp (NYSE:EW).

How have hedgies been trading Edwards Lifesciences Corp (NYSE:EW)?

Heading into the fourth quarter of 2016, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 12% decline from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Principal Global Investors’ Columbus Circle Investors has the most valuable position in Edwards Lifesciences Corp (NYSE:EW), worth close to $242 million, amounting to 2.6% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $232.8 million position. Other members of the smart money that hold long positions contain Ken Griffin’s Citadel Investment Group, Jim Simons’ Renaissance Technologies and Samuel Isaly’s OrbiMed Advisors.

Judging by the fact that Edwards Lifesciences Corp (NYSE:EW) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, worth about $29.9 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $28.8 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Edwards Lifesciences Corp (NYSE:EW) but similarly valued. These stocks are Synchrony Financial (NYSE:SYF), Apache Corporation (NYSE:APA), Williams Partners L.P. (NYSE:WPZ), and Southern Copper Corp (NYSE:SCCO). This group of stocks’ market values resemble EW’s market value.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1.47 billion. That figure was $2.00 billion in EW’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Williams Partners L.P. (NYSE:WPZ) is the least popular one with only 11 bullish hedge fund positions. Edwards Lifesciences Corp (NYSE:EW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SYF might be a better candidate to consider a long position.

Disclosure: None