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. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. 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 Merit Medical Systems, Inc. (NASDAQ:MMSI).
Merit Medical Systems, Inc. (NASDAQ:MMSI) was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. MMSI investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 17 hedge funds in our database with MMSI holdings at the end of the previous quarter. Our calculations also showed that MMSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are assumed to be slow, outdated investment tools of the past. While there are over 8000 funds in operation at the moment, Our experts look at the leaders of this club, approximately 750 funds. It is estimated that this group of investors administer most of the smart money’s total asset base, and by watching their first-class stock picks, Insider Monkey has formulated a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action surrounding Merit Medical Systems, Inc. (NASDAQ:MMSI).
What does smart money think about Merit Medical Systems, Inc. (NASDAQ:MMSI)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in MMSI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Merit Medical Systems, Inc. (NASDAQ:MMSI), which was worth $16.4 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $16.1 million worth of shares. Fisher Asset Management, D E Shaw, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Merit Medical Systems, Inc. (NASDAQ:MMSI), around 0.86% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to MMSI.
Since Merit Medical Systems, Inc. (NASDAQ:MMSI) has faced declining sentiment from the smart money, we can see that there is a sect of hedgies who sold off their full holdings heading into Q4. It’s worth mentioning that Christopher James’s Partner Fund Management sold off the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $26.5 million in stock, and Ian Simm’s Impax Asset Management was right behind this move, as the fund dropped about $9.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Merit Medical Systems, Inc. (NASDAQ:MMSI). We will take a look at Cott Corporation (NYSE:COT), Usa Compression Partners LP (NYSE:USAC), Veoneer, Inc. (NYSE:VNE), and U.S. Physical Therapy, Inc. (NYSE:USPH). This group of stocks’ market values resemble MMSI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COT | 26 | 587913 | -1 |
| USAC | 4 | 5116 | 1 |
| VNE | 10 | 149807 | -2 |
| USPH | 12 | 64630 | 1 |
| Average | 13 | 201867 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $80 million in MMSI’s case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Merit Medical Systems, Inc. (NASDAQ:MMSI) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MMSI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MMSI were disappointed as the stock returned -8.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.
