Is Envista Holdings Corporation (NVST) A Good Stock To Buy?

In this article you are going to find out whether hedge funds think Envista Holdings Corporation (NYSE:NVST) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is NVST a good stock to buy? Envista Holdings Corporation (NYSE:NVST) investors should pay attention to an increase in hedge fund interest recently. Envista Holdings Corporation (NYSE:NVST) was in 38 hedge funds’ portfolios at the end of June. The all time high for this statistic is 42. There were 34 hedge funds in our database with NVST positions at the end of the first quarter. Our calculations also showed that NVST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 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 79 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 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.

Robert Pohly of Samlyn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 analyze the recent hedge fund action encompassing Envista Holdings Corporation (NYSE:NVST).

Do Hedge Funds Think NVST Is A Good Stock To Buy Now?

At second quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NVST over the last 24 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Ariel Investments held the most valuable stake in Envista Holdings Corporation (NYSE:NVST), which was worth $276.5 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $152.8 million worth of shares. Millennium Management, Paradice Investment Management, and Balyasny 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 Paradice Investment Management allocated the biggest weight to Envista Holdings Corporation (NYSE:NVST), around 4.79% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, designating 4.01 percent of its 13F equity portfolio to NVST.

Now, key hedge funds were leading the bulls’ herd. Samlyn Capital, managed by Robert Pohly, created the most outsized position in Envista Holdings Corporation (NYSE:NVST). Samlyn Capital had $43 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $37.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Israel Englander’s Millennium Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Envista Holdings Corporation (NYSE:NVST) but similarly valued. These stocks are Pacific Biosciences of California, Inc. (NASDAQ:PACB), BanColombia S.A. (NYSE:CIB), BlackBerry Limited (NYSE:BB), Leggett & Platt, Inc. (NYSE:LEG), Post Holdings Inc (NYSE:POST), Bumble Inc. (NASDAQ:BMBL), and Fastly, Inc. (NYSE:FSLY). This group of stocks’ market caps are similar to NVST’s market cap.

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As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $1137 million in NVST’s case. Post Holdings Inc (NYSE:POST) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Envista Holdings Corporation (NYSE:NVST) is more popular among hedge funds. Our overall hedge fund sentiment score for NVST is 86.1. 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. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately NVST wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NVST were disappointed as the stock returned -9.2% since the end of the second quarter (through 10/11) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.