Was The Smart Money Right About Edwards Lifesciences Corporation (EW)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Edwards Lifesciences Corporation (NYSE:EW) based on that data and determine whether they were really smart about the stock.

Edwards Lifesciences Corporation (NYSE:EW) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic is 49. EW shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 47 hedge funds in our database with EW holdings at the end of June. Our calculations also showed that EW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s take a look at the recent hedge fund action encompassing Edwards Lifesciences Corporation (NYSE:EW).

Noam Gottesman of GLG Partners

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

At Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2021. By comparison, 46 hedge funds held shares or bullish call options in EW a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Edwards Lifesciences Corporation (NYSE:EW) was held by Fisher Asset Management, which reported holding $727.3 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $288.9 million position. Other investors bullish on the company included Two Sigma Advisors, GLG Partners, and OrbiMed Advisors. In terms of the portfolio weights assigned to each position Tri Locum Partners allocated the biggest weight to Edwards Lifesciences Corporation (NYSE:EW), around 5.53% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, designating 2.71 percent of its 13F equity portfolio to EW.

Because Edwards Lifesciences Corporation (NYSE:EW) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of hedge funds who sold off their entire stakes in the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $66.8 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also said goodbye to its stock, about $31.8 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Edwards Lifesciences Corporation (NYSE:EW). We will take a look at Vale SA (NYSE:VALE), DoorDash, Inc. (NYSE:DASH), CME Group Inc (NASDAQ:CME), Cigna Corporation (NYSE:CI), Westpac Banking Corporation (NYSE:WBK), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), and CSX Corporation (NASDAQ:CSX). All of these stocks’ market caps resemble EW’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $3326 million. That figure was $2169 million in EW’s case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 6 bullish hedge fund positions. Edwards Lifesciences Corporation (NYSE:EW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EW is 59.2. 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. 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 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, EW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EW were disappointed as the stock returned -3.5% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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