Were Hedge Funds Right About CONMED Corporation (CNMD)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards CONMED Corporation (NYSE:CNMD) and determine whether hedge funds skillfully traded this stock.

Is CONMED Corporation (NYSE:CNMD) a buy here? Prominent investors were getting less optimistic. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that CNMD 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). CNMD was in 29 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with CNMD positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are seen as underperforming, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, We hone in on the aristocrats of this group, approximately 850 funds. Most estimates calculate that this group of people control the lion’s share of the smart money’s total asset base, and by keeping track of their first-class stock picks, Insider Monkey has revealed a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Arthur B Cohen and Joseph Healey of Healthcor Management LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing CONMED Corporation (NYSE:CNMD).

How are hedge funds trading CONMED Corporation (NYSE:CNMD)?

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNMD over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Healthcor Management LP was the largest shareholder of CONMED Corporation (NYSE:CNMD), with a stake worth $39.4 million reported as of the end of September. Trailing Healthcor Management LP was Millennium Management, which amassed a stake valued at $31.2 million. Point72 Asset Management, Fisher Asset Management, and Polar 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 Healthcor Management LP allocated the biggest weight to CONMED Corporation (NYSE:CNMD), around 1.68% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to CNMD.

Because CONMED Corporation (NYSE:CNMD) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that decided to sell off their full holdings by the end of the first quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $10.1 million in stock, and Efrem Kamen’s Pura Vida Investments was right behind this move, as the fund dumped about $5.2 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CONMED Corporation (NYSE:CNMD) but similarly valued. These stocks are Acadia Healthcare Company Inc (NASDAQ:ACHC), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Ambarella Inc (NASDAQ:AMBA), and Sabre Corporation (NASDAQ:SABR). All of these stocks’ market caps are similar to CNMD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACHC 24 272616 -4
AUPH 28 482900 7
AMBA 21 161557 -5
SABR 30 134131 6
Average 25.75 262801 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $207 million in CNMD’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand Ambarella Inc (NASDAQ:AMBA) is the least popular one with only 21 bullish hedge fund positions. CONMED Corporation (NYSE:CNMD) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CNMD as the stock returned 26.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Conmed Corp (NASDAQ:CNMD)

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