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Should You Avoid Envista Holdings Corporation (NVST)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Envista Holdings Corporation (NYSE:NVST).

Envista Holdings Corporation (NYSE:NVST) was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. NVST shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 42 hedge funds in our database with NVST holdings at the end of the previous quarter. Our calculations also showed that NVST isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 a large number of gauges market participants employ to size up their holdings. A couple of the less known gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best money managers can trounce the S&P 500 by a superb amount (see the details here).

Michael Castor of Sio Capital

Michael Castor of Sio Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action encompassing Envista Holdings Corporation (NYSE:NVST).

Hedge fund activity in Envista Holdings Corporation (NYSE:NVST)

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -48% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in NVST a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Gates Capital Management held the most valuable stake in Envista Holdings Corporation (NYSE:NVST), which was worth $55.3 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $52.1 million worth of shares. Paradice Investment Management, Polar Capital, and D E Shaw 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 Paradice Investment Management allocated the biggest weight to Envista Holdings Corporation (NYSE:NVST), around 4.43% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, designating 4.29 percent of its 13F equity portfolio to NVST.

Since Envista Holdings Corporation (NYSE:NVST) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few funds who were dropping their entire stakes by the end of the first quarter. Intriguingly, Ricky Sandler’s Eminence Capital said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, worth close to $90 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $65.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 20 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Envista Holdings Corporation (NYSE:NVST). We will take a look at Tripadvisor Inc (NASDAQ:TRIP), Tegna Inc (NYSE:TGNA), Parsley Energy Inc (NYSE:PE), and FireEye Inc (NASDAQ:FEYE). This group of stocks’ market values are similar to NVST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRIP 30 492031 -9
TGNA 29 377379 10
PE 45 437697 -7
FEYE 32 159577 2
Average 34 366671 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $274 million in NVST’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Tegna Inc (NYSE:TGNA) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Envista Holdings Corporation (NYSE:NVST) is even less popular than TGNA. Hedge funds clearly dropped the ball on NVST as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on NVST as the stock returned 42.8% so far in the second quarter and outperformed the market by an even larger margin.

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