It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Edwards Lifesciences Corporation (NYSE:EW).
Edwards Lifesciences Corporation (NYSE:EW) has seen a decrease in support from the world’s most elite money managers lately. Our calculations also showed that EW isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to review the latest hedge fund action surrounding Edwards Lifesciences Corporation (NYSE:EW).
How are hedge funds trading Edwards Lifesciences Corporation (NYSE:EW)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EW over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Edwards Lifesciences Corporation (NYSE:EW) was held by AQR Capital Management, which reported holding $125.5 million worth of stock at the end of September. It was followed by Partner Fund Management with a $82.8 million position. Other investors bullish on the company included OrbiMed Advisors, Millennium Management, and Adage Capital Management.
Because Edwards Lifesciences Corporation (NYSE:EW) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of fund managers that decided to sell off their full holdings last quarter. Interestingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dumped the biggest stake of the 700 funds tracked by Insider Monkey, totaling close to $79 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund said goodbye to about $34.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Edwards Lifesciences Corporation (NYSE:EW). These stocks are ServiceNow Inc (NYSE:NOW), LyondellBasell Industries NV (NYSE:LYB), Koninklijke Philips NV (NYSE:PHG), and Valero Energy Corporation (NYSE:VLO). This group of stocks’ market caps are similar to EW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOW | 61 | 2670389 | -4 |
| LYB | 37 | 1267887 | -2 |
| PHG | 14 | 218249 | -1 |
| VLO | 32 | 1347982 | -2 |
| Average | 36 | 1376127 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1376 million. That figure was $461 million in EW’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 14 bullish hedge fund positions. Edwards Lifesciences Corporation (NYSE:EW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on EW, though not to the same extent, as the stock returned 17.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
