Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards AtriCure Inc. (NASDAQ:ATRC).
AtriCure Inc. (NASDAQ:ATRC) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. AtriCure Inc. (NASDAQ:ATRC) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistic is 25. Our calculations also showed that ATRC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s check out the fresh hedge fund action encompassing AtriCure Inc. (NASDAQ:ATRC).
Do Hedge Funds Think ATRC Is A Good Stock To Buy Now?
At second quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the first quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in ATRC a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in AtriCure Inc. (NASDAQ:ATRC), worth close to $65.8 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Pura Vida Investments, led by Efrem Kamen, holding a $44.9 million position; 1.4% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to AtriCure Inc. (NASDAQ:ATRC), around 3.37% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.42 percent of its 13F equity portfolio to ATRC.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Renaissance Technologies, initiated the most valuable position in AtriCure Inc. (NASDAQ:ATRC). Renaissance Technologies had $5.4 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new ATRC investors: Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Greg Eisner’s Engineers Gate Manager.
Let’s also examine hedge fund activity in other stocks similar to AtriCure Inc. (NASDAQ:ATRC). These stocks are INMODE LTD. (NASDAQ:INMD), ViaSat, Inc. (NASDAQ:VSAT), Riot Blockchain, Inc (NASDAQ:RIOT), Poshmark, Inc. (NASDAQ:POSH), CommVault Systems, Inc. (NASDAQ:CVLT), GoHealth, Inc. (NASDAQ:GOCO), and Mercury General Corporation (NYSE:MCY). This group of stocks’ market caps match ATRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INMD | 26 | 298204 | 3 |
| VSAT | 22 | 1260800 | -4 |
| RIOT | 17 | 100716 | 5 |
| POSH | 15 | 57334 | 1 |
| CVLT | 28 | 693176 | 5 |
| GOCO | 14 | 483021 | -3 |
| MCY | 14 | 175204 | -6 |
| Average | 19.4 | 438351 | 0.1 |
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 $438 million. That figure was $243 million in ATRC’s case. CommVault Systems, Inc. (NASDAQ:CVLT) is the most popular stock in this table. On the other hand GoHealth, Inc. (NASDAQ:GOCO) is the least popular one with only 14 bullish hedge fund positions. AtriCure Inc. (NASDAQ:ATRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATRC is 60.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ATRC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ATRC were disappointed as the stock returned -7.8% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Atricure Inc. (NASDAQ:ATRC)
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Disclosure: None. This article was originally published at Insider Monkey.
