Is ShockWave Medical, Inc. (SWAV) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ShockWave Medical, Inc. (NASDAQ:SWAV), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is SWAV a good stock to buy? Investors who are in the know were getting less optimistic. The number of long hedge fund bets decreased by 5 in recent months. ShockWave Medical, Inc. (NASDAQ:SWAV) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that SWAV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner of Caxton Associates LP

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

Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in SWAV a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Millennium Management held the most valuable stake in ShockWave Medical, Inc. (NASDAQ:SWAV), which was worth $36.1 million at the end of the fourth quarter. On the second spot was Holocene Advisors which amassed $33.7 million worth of shares. Rock Springs Capital Management, D E Shaw, and Point72 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 Atika Capital allocated the biggest weight to ShockWave Medical, Inc. (NASDAQ:SWAV), around 1.37% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, designating 0.63 percent of its 13F equity portfolio to SWAV.

Seeing as ShockWave Medical, Inc. (NASDAQ:SWAV) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that slashed their full holdings heading into Q2. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $5.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $3.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to ShockWave Medical, Inc. (NASDAQ:SWAV). These stocks are Allison Transmission Holdings Inc (NYSE:ALSN), The Wendy’s Company (NASDAQ:WEN), B2Gold Corp (NYSE:BTG), Zhihu Inc. (NYSE:ZH), Element Solutions Inc. (NYSE:ESI), DCP Midstream LP (NYSE:DCP), and Simpson Manufacturing Co, Inc. (NYSE:SSD). This group of stocks’ market valuations match SWAV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $220 million in SWAV’s case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 4 bullish hedge fund positions. ShockWave Medical, Inc. (NASDAQ:SWAV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SWAV is 45.6. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on SWAV as the stock returned 34.1% since the end of the first quarter (through 7/23) and outperformed the market by an even larger margin.

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