Hedge Funds Are Selling ABIOMED, Inc. (ABMD) But Worry Not, Sentiment Remains Strong

The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we analyze what the smart money thinks of ABIOMED, Inc. (NASDAQ:ABMD) and find out how it is affected by hedge funds’ moves.

Is ABIOMED, Inc. (NASDAQ:ABMD) undervalued? Prominent investors are in a bearish mood. The number of bullish hedge fund positions fell by 5 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Williams-Sonoma, Inc. (NYSE:WSM), Tahoe Resources Inc (NYSE:TAHO), and Tesoro Logistics LP (NYSE:TLLP) to gather more data points.

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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What does the smart money think about ABIOMED, Inc. (NASDAQ:ABMD)?

At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a 17% decline from the second quarter of 2016, dropping ownership back to where it was two quarters earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William Leland Edwards’s Palo Alto Investors has the number one position in ABIOMED, Inc. (NASDAQ:ABMD), worth close to $242.3 million, corresponding to 14.1% of its total 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding an $84.9 million position. Remaining peers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D E Shaw, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Judging by the fact that ABIOMED, Inc. (NASDAQ:ABMD) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of money managers that decided to sell off their entire stakes in the third quarter. Intriguingly, Paul Sinclair’s Blue Jay Capital Management sold off the largest position of the 700 funds followed by Insider Monkey, totaling about $11.5 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $9.7 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest dropped by 5 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to ABIOMED, Inc. (NASDAQ:ABMD). We will take a look at Williams-Sonoma, Inc. (NYSE:WSM), Tahoe Resources Inc (NYSE:TAHO), Tesoro Logistics LP (NYSE:TLLP), and Manhattan Associates, Inc. (NASDAQ:MANH). This group of stocks’ market valuations match ABMD’s market valuation.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $581 million in ABMD’s case. Tahoe Resources Inc (NYSE:TAHO) is the most popular stock in this table. On the other hand Tesoro Logistics LP (NYSE:TLLP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks ABIOMED, Inc. (NASDAQ:ABMD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers despite the Q3 drop in ownership, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None