We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 June. At Insider Monkey, we follow nearly 835 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 Merit Medical Systems, Inc. (NASDAQ:MMSI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Hedge fund interest in Merit Medical Systems, Inc. (NASDAQ:MMSI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 ICF International Inc (NASDAQ:ICFI), BRP Inc. (NASDAQ:DOOO), and Hecla Mining Company (NYSE:HL) to gather more data points. Our calculations also showed that MMSI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are a lot of formulas market participants can use to appraise publicly traded companies. Some of the most under-the-radar formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a solid margin (see the details here).
Michael Castor of Sio Capital
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action surrounding Merit Medical Systems, Inc. (NASDAQ:MMSI).
Hedge fund activity in Merit Medical Systems, Inc. (NASDAQ:MMSI)
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MMSI over the last 18 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.
More specifically, D E Shaw was the largest shareholder of Merit Medical Systems, Inc. (NASDAQ:MMSI), with a stake worth $27.5 million reported as of the end of September. Trailing D E Shaw was Fisher Asset Management, which amassed a stake valued at $13.7 million. Intrinsic Edge Capital, Millennium Management, and Sio Capital 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 Sio Capital allocated the biggest weight to Merit Medical Systems, Inc. (NASDAQ:MMSI), around 1.12% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 1.1 percent of its 13F equity portfolio to MMSI.
Seeing as Merit Medical Systems, Inc. (NASDAQ:MMSI) has experienced bearish sentiment from the smart money, we can see that there was a specific group of fund managers who were dropping their positions entirely last quarter. At the top of the heap, Joseph Edelman’s Perceptive Advisors sold off the biggest position of the 750 funds monitored by Insider Monkey, comprising about $16.1 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $6.3 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Merit Medical Systems, Inc. (NASDAQ:MMSI). We will take a look at ICF International Inc (NASDAQ:ICFI), BRP Inc. (NASDAQ:DOOO), Hecla Mining Company (NYSE:HL), and Tilray, Inc. (NASDAQ:TLRY). This group of stocks’ market values are similar to MMSI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICFI | 11 | 29456 | 0 |
| DOOO | 9 | 126097 | -1 |
| HL | 14 | 78944 | 4 |
| TLRY | 15 | 41042 | 0 |
| Average | 12.25 | 68885 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $81 million in MMSI’s case. Tilray, Inc. (NASDAQ:TLRY) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Merit Medical Systems, Inc. (NASDAQ:MMSI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still managed to beat the market by 4.2 percentage points. Hedge funds were also right about betting on MMSI as the stock returned 7.3% so far in 2020 (through April 6th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
