Do Hedge Funds Love Invuity, Inc. (IVTY)?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Invuity, Inc. (NASDAQ:IVTY).

Is Invuity, Inc. (NASDAQ:IVTY) undervalued? The smart money is undoubtedly buying. The number of long hedge fund bets that are revealed through the 13F filings advanced by 5 recently. IVTY was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 6 hedge funds in our database with IVTY positions at the end of the previous quarter. At the end of this article we will also compare IVTY to other stocks including Alico, Inc. (NASDAQ:ALCO), Nathan’s Famous, Inc. (NASDAQ:NATH), and Cascadian Therapeutics Inc (USA) (NASDAQ:CASC) 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.

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With all of this in mind, we’re going to check out the new action regarding Invuity, Inc. (NASDAQ:IVTY).

Hedge fund activity in Invuity, Inc. (NASDAQ:IVTY)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 83% from the second quarter of 2016. On the other hand, there were a total of 5 hedge funds with a bullish position in IVTY at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, James E. Flynn’s Deerfield Management has the biggest position in Invuity, Inc. (NASDAQ:IVTY), worth close to $17.6 million, accounting for 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Cormorant Asset Management, led by Bihua Chen, which holds a $10.5 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Mark Kingdon’s Kingdon Capital, Brandon Osten’s Venator Capital Management and Richard Driehaus’s Driehaus Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, specific money managers have been driving this bullishness. Venator Capital Management, led by Brandon Osten, assembled the most valuable position in Invuity, Inc. (NASDAQ:IVTY). According to its latest 13F filing, the fund had $3.8 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $2.2 million position during the quarter. The following funds were also among the new IVTY investors: Stuart Weisbrod’s Iguana Healthcare Management, Renaissance Technologies, one of the largest hedge funds in the world, and Mark Broach’s Manatuck Hill Partners.

Let’s go over hedge fund activity in other stocks similar to Invuity, Inc. (NASDAQ:IVTY). We will take a look at Alico, Inc. (NASDAQ:ALCO), Nathan’s Famous, Inc. (NASDAQ:NATH), Cascadian Therapeutics Inc (USA) (NASDAQ:CASC), and Farmers Capital Bank Corp (NASDAQ:FFKT). This group of stocks’ market values resemble IVTY’s market value.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $45 million in IVTY’s case. Cascadian Therapeutics Inc (USA) (NASDAQ:CASC) is the most popular stock in this table. On the other hand Farmers Capital Bank Corp (NASDAQ:FFKT) is the least popular one with only 3 bullish hedge fund positions. Invuity, Inc. (NASDAQ:IVTY) 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 CASC might be a better candidate to consider taking a long position in.

Disclosure: none.