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 LivaNova PLC (NASDAQ:LIVN) and determine whether hedge funds skillfully traded this stock.
LivaNova PLC (NASDAQ:LIVN) has experienced an increase in enthusiasm from smart money in recent months. LivaNova PLC (NASDAQ:LIVN) was in 29 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 30. Our calculations also showed that LIVN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Arthur B Cohen and Joseph Healey of Healthcor Management LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s analyze the latest hedge fund action encompassing LivaNova PLC (NASDAQ:LIVN).
Hedge fund activity in LivaNova PLC (NASDAQ:LIVN)
At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the first quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in LIVN a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, holds the largest position in LivaNova PLC (NASDAQ:LIVN). Healthcor Management LP has a $69.6 million position in the stock, comprising 2.9% of its 13F portfolio. On Healthcor Management LP’s heels is David Paradice of Paradice Investment Management, with a $40.2 million position; 3% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish encompass Lee Ainslie’s Maverick Capital, Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to LivaNova PLC (NASDAQ:LIVN), around 4.98% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, dishing out 3.03 percent of its 13F equity portfolio to LIVN.
As aggregate interest increased, some big names were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, assembled the largest position in LivaNova PLC (NASDAQ:LIVN). Maverick Capital had $31.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $30 million position during the quarter. The following funds were also among the new LIVN investors: Sander Gerber’s Hudson Bay Capital Management, Ric Dillon’s Diamond Hill Capital, and Efrem Kamen’s Pura Vida Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as LivaNova PLC (NASDAQ:LIVN) but similarly valued. These stocks are Capri Holdings Limited (NYSE:CPRI), Inari Medical, Inc. (NASDAQ:NARI), MGE Energy, Inc. (NASDAQ:MGEE), BancorpSouth Bank (NYSE:BXS), Park Hotels & Resorts Inc. (NYSE:PK), Taubman Centers, Inc. (NYSE:TCO), and Rogers Corporation (NYSE:ROG). This group of stocks’ market valuations resemble LIVN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPRI | 28 | 446164 | -1 |
| NARI | 19 | 79851 | 19 |
| MGEE | 5 | 66359 | -1 |
| BXS | 10 | 32775 | -5 |
| PK | 21 | 90634 | -5 |
| TCO | 40 | 521866 | 2 |
| ROG | 13 | 100053 | -6 |
| Average | 19.4 | 191100 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $369 million in LIVN’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 5 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. Our overall hedge fund sentiment score for LIVN is 73.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23.8% in 2020 through September 14th and beat the market by 17.6 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 -5.1% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
