Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Cryolife Inc (NYSE:CRY) from the perspective of those elite funds.
Cryolife Inc (NYSE:CRY) was in 13 hedge funds’ portfolios at the end of March. CRY has seen an increase in hedge fund sentiment lately. There were 11 hedge funds in our database with CRY holdings at the end of the previous quarter. Our calculations also showed that CRY isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s analyze the fresh hedge fund action regarding Cryolife Inc (NYSE:CRY).
How have hedgies been trading Cryolife Inc (NYSE:CRY)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in CRY a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Cryolife Inc (NYSE:CRY), which was worth $10.8 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $5.6 million worth of shares. Moreover, SG Capital Management, Millennium Management, and Highland Capital Management were also bullish on Cryolife Inc (NYSE:CRY), allocating a large percentage of their portfolios to this stock.
Consequently, key hedge funds were leading the bulls’ herd. SG Capital Management, managed by Ken Grossman and Glen Schneider, initiated the biggest position in Cryolife Inc (NYSE:CRY). SG Capital Management had $2.2 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $1.5 million position during the quarter. The following funds were also among the new CRY investors: John Overdeck and David Siegel’s Two Sigma Advisors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Cryolife Inc (NYSE:CRY). These stocks are Universal Insurance Holdings, Inc. (NYSEAMEX:UVE), Golub Capital BDC Inc (NASDAQ:GBDC), Huron Consulting Group Inc. (NASDAQ:HURN), and Skyline Champion Corporation (NYSE:SKY). This group of stocks’ market valuations are similar to CRY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UVE | 13 | 38385 | -7 |
| GBDC | 8 | 29834 | -2 |
| HURN | 11 | 25163 | -2 |
| SKY | 24 | 218938 | 1 |
| Average | 14 | 78080 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $25 million in CRY’s case. Skyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Golub Capital BDC Inc (NASDAQ:GBDC) is the least popular one with only 8 bullish hedge fund positions. Cryolife Inc (NYSE:CRY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on CRY as the stock returned 6.4% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
