Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
In this article, we are going to take a closer look at the hedge fund sentiment towards LivaNova PLC (NASDAQ:LIVN). Overall, the stock registered a decline in popularity among the investors in our database during the third quarter and 16 funds held shares of the company at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Associated Banc Corp (NYSE:ASB), Valero Energy Partners LP (NYSE:VLP), and Exelixis, Inc. (NASDAQ:EXEL) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, let’s take a peek at the key action encompassing LivaNova PLC (NASDAQ:LIVN).
What does the smart money think about LivaNova PLC (NASDAQ:LIVN)?
At the end of the third quarter, 16 funds tracked by Insider Monkey were long this stock, down from 20 funds at the end of June. The graph below displays the number of hedge funds with bullish position in LIVN over the last five quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the largest position in LivaNova PLC (NASDAQ:LIVN). Renaissance Technologies has a $125.9 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund is Stuart Powers’ Hengistbury Investment Partners, which holds a $108.9 million position; 18.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass Stephen DuBois’ Camber Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Martin Whitman’s Third Avenue Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that LivaNova PLC (NASDAQ:LIVN) has sustained bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that decided to sell off their positions entirely between July and September. At the top of the heap, Christopher James’ Partner Fund Management cut the largest investment of all the hedgies watched by Insider Monkey, comprising an estimated $12.3 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $6.6 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as LivaNova PLC (NASDAQ:LIVN) but similarly valued. These stocks are Associated Banc Corp (NYSE:ASB), Valero Energy Partners LP (NYSE:VLP), Exelixis, Inc. (NASDAQ:EXEL), and ALLETE Inc (NYSE:ALE). All of these stocks’ market caps are closest to LIVN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASB | 12 | 122108 | 1 |
| VLP | 3 | 4121 | -2 |
| EXEL | 34 | 505946 | 13 |
| ALE | 11 | 56449 | -5 |
As you can see these stocks had an average of 15 funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $409 million in LIVN’s case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Valero Energy Partners LP (NYSE:VLP) is the least popular one with only three funds having reported long positions. LivaNova PLC (NASDAQ:LIVN) 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. In this regard Exelixis, Inc. (NASDAQ:EXEL) might be a better candidate to consider taking a long position in.
Disclosure: none
