Did Hedge Funds Make The Right Call On LivaNova PLC (LIVN) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtLivaNova PLC (NASDAQ:LIVN) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is LivaNova PLC (NASDAQ:LIVN) a bargain? The best stock pickers were taking an optimistic view. The number of bullish hedge fund positions went up by 2 lately. Our calculations also showed that LIVN 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). LIVN was in 24 hedge funds’ portfolios at the end of March. There were 22 hedge funds in our database with LIVN holdings at the end of the previous quarter.

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. 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 if you have any good ideas send us an email. With all of this in mind let’s take a gander at the fresh hedge fund action encompassing LivaNova PLC (NASDAQ:LIVN).

What have hedge funds been doing with LivaNova PLC (NASDAQ:LIVN)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LIVN over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in LivaNova PLC (NASDAQ:LIVN) was held by Healthcor Management LP, which reported holding $55.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $38.5 million position. Other investors bullish on the company included Paradice Investment Management, D E Shaw, and Adage Capital Management. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to LivaNova PLC (NASDAQ:LIVN), around 4.25% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, setting aside 2.37 percent of its 13F equity portfolio to LIVN.

Now, specific money managers were leading the bulls’ herd. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, created the largest position in LivaNova PLC (NASDAQ:LIVN). Healthcor Management LP had $55.5 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $17 million position during the quarter. The other funds with brand new LIVN positions are Henrik Rhenman’s Rhenman & Partners Asset Management, Fang Zheng’s Keywise Capital Management, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as LivaNova PLC (NASDAQ:LIVN) but similarly valued. We will take a look at GATX Corporation (NYSE:GATX), Franklin Electric Co. (NASDAQ:FELE), Sprouts Farmers Market Inc (NASDAQ:SFM), and Axsome Therapeutics, Inc. (NASDAQ:AXSM). All of these stocks’ market caps are closest to LIVN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $236 million in LIVN’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand GATX Corporation (NYSE:GATX) is the least popular one with only 13 bullish hedge fund positions. LivaNova PLC (NASDAQ:LIVN) 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. 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 beat the market by 15.5 percentage points. Unfortunately LIVN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LIVN were disappointed as the stock returned 6.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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