Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Nevro Corp (NYSE:NVRO).
Is Nevro Corp (NYSE:NVRO) worth your attention right now? Prominent investors are getting more bullish. The number of bullish hedge fund bets advanced by 11 recently. Our calculations also showed that NVRO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). NVRO was in 33 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 22 hedge funds in our database with NVRO positions at the end of the previous quarter.
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Arthur B Cohen and Joseph Healey of Healthcor Management LP
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the fresh hedge fund action regarding Nevro Corp (NYSE:NVRO).
Hedge fund activity in Nevro Corp (NYSE:NVRO)
At Q4’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in NVRO 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, D E Shaw held the most valuable stake in Nevro Corp (NYSE:NVRO), which was worth $227.1 million at the end of the third quarter. On the second spot was Healthcor Management LP which amassed $137.5 million worth of shares. Redmile Group, Perceptive Advisors, and Citadel Investment Group 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 Tiger Eye Capital allocated the biggest weight to Nevro Corp (NYSE:NVRO), around 4.96% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, dishing out 4.91 percent of its 13F equity portfolio to NVRO.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, assembled the largest position in Nevro Corp (NYSE:NVRO). Renaissance Technologies had $26.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $18 million position during the quarter. The following funds were also among the new NVRO investors: Kevin Molloy’s Iron Triangle Partners, Michael Rockefeller and Karl Kroeker’s Woodline Partners, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nevro Corp (NYSE:NVRO) but similarly valued. We will take a look at Apple Hospitality REIT Inc (NYSE:APLE), Terreno Realty Corporation (NYSE:TRNO), Tegna Inc (NYSE:TGNA), and The Goodyear Tire & Rubber Company (NASDAQ:GT). This group of stocks’ market caps are similar to NVRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APLE | 15 | 135141 | 0 |
| TRNO | 14 | 32370 | 3 |
| TGNA | 19 | 400244 | 1 |
| GT | 32 | 573619 | 5 |
| Average | 20 | 285344 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $961 million in NVRO’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Nevro Corp (NYSE:NVRO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on NVRO, though not to the same extent, as the stock returned -22.3% during the first quarter (through March 25th) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
