Were Hedge Funds Right About Flocking Into Avedro, Inc. (AVDR) ?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Avedro, Inc. (NASDAQ:AVDR).

Is Avedro, Inc. (NASDAQ:AVDR) a bargain? The best stock pickers are buying. The number of bullish hedge fund positions inched up by 13 in recent months. Our calculations also showed that avdr isn’t among the 30 most popular stocks among hedge funds. AVDR was in 13 hedge funds’ portfolios at the end of March. There were 0 hedge funds in our database with AVDR holdings at the end of the previous quarter.

In the eyes of most market participants, hedge funds are perceived as slow, outdated financial tools of the past. While there are over 8000 funds in operation today, Our experts hone in on the aristocrats of this club, around 750 funds. These money managers manage the majority of the smart money’s total asset base, and by tailing their first-class picks, Insider Monkey has brought to light many investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

Samuel Isaly Orbimed Advisors

Let’s take a gander at the fresh hedge fund action regarding Avedro, Inc. (NASDAQ:AVDR).

Hedge fund activity in Avedro, Inc. (NASDAQ:AVDR)

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13 from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVDR over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AVDR Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the most valuable position in Avedro, Inc. (NASDAQ:AVDR). OrbiMed Advisors has a $52 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Endurant Capital Management, managed by Vishal Saluja and Pham Quang, which holds a $5.4 million position; 2.1% of its 13F portfolio is allocated to the stock. Other peers that are bullish contain Israel Englander’s Millennium Management, Jeremy Green’s Redmile Group and Joseph Edelman’s Perceptive Advisors.

Now, key money managers were leading the bulls’ herd. OrbiMed Advisors, managed by Samuel Isaly, created the largest position in Avedro, Inc. (NASDAQ:AVDR). OrbiMed Advisors had $52 million invested in the company at the end of the quarter. Vishal Saluja and Pham Quang’s Endurant Capital Management also made a $5.4 million investment in the stock during the quarter. The other funds with brand new AVDR positions are Israel Englander’s Millennium Management, Jeremy Green’s Redmile Group, and Joseph Edelman’s Perceptive Advisors.

Let’s check out hedge fund activity in other stocks similar to Avedro, Inc. (NASDAQ:AVDR). These stocks are Northern Dynasty Minerals Ltd. (NYSE:NAK), Spark Networks SE (NYSE:LOV), Ideanomics, Inc. (NASDAQ:IDEX), and Westport Fuel Systems Inc. (NASDAQ:WPRT). This group of stocks’ market caps are closest to AVDR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NAK 8 12787 5
LOV 2 23628 0
IDEX 1 371 0
WPRT 12 20777 2
Average 5.75 14391 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $65 million in AVDR’s case. Westport Fuel Systems Inc. (NASDAQ:WPRT) is the most popular stock in this table. On the other hand Ideanomics, Inc. (NASDAQ:IDEX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Avedro, Inc. (NASDAQ:AVDR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on AVDR as the stock returned 71.2% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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