“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards ViewRay, Inc. (NASDAQ:VRAY) and see how it was affected.
ViewRay, Inc. (NASDAQ:VRAY) was in 17 hedge funds’ portfolios at the end of the second quarter of 2019. VRAY shareholders have witnessed a decrease in hedge fund interest of late. There were 23 hedge funds in our database with VRAY positions at the end of the previous quarter. Our calculations also showed that VRAY isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the fresh hedge fund action regarding ViewRay, Inc. (NASDAQ:VRAY).
What have hedge funds been doing with ViewRay, Inc. (NASDAQ:VRAY)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VRAY over the last 16 quarters. 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, Park West Asset Management held the most valuable stake in ViewRay, Inc. (NASDAQ:VRAY), which was worth $67.1 million at the end of the second quarter. On the second spot was Puissance Capital Managementá which amassed $60.3 million worth of shares. Moreover, Perceptive Advisors, OrbiMed Advisors, and Healthcor Management LP were also bullish on ViewRay, Inc. (NASDAQ:VRAY), allocating a large percentage of their portfolios to this stock.
Because ViewRay, Inc. (NASDAQ:VRAY) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their positions entirely heading into Q3. Intriguingly, Constantinos J. Christofilis’s Archon Capital Management sold off the largest stake of the 750 funds followed by Insider Monkey, worth close to $2.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also cut its stock, about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ViewRay, Inc. (NASDAQ:VRAY) but similarly valued. These stocks are MacroGenics Inc (NASDAQ:MGNX), Adecoagro SA (NYSE:AGRO), istar Inc (NYSE:STAR), and Century Communities, Inc (NYSE:CCS). This group of stocks’ market valuations are closest to VRAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGNX | 19 | 115493 | -4 |
| AGRO | 12 | 184237 | -5 |
| STAR | 5 | 66936 | -4 |
| CCS | 17 | 137530 | 1 |
| Average | 13.25 | 126049 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $126 million. That figure was $348 million in VRAY’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand istar Inc (NYSE:STAR) is the least popular one with only 5 bullish hedge fund positions. ViewRay, Inc. (NASDAQ:VRAY) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VRAY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VRAY were disappointed as the stock returned -67.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
