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Is ABIOMED, Inc. (ABMD) A Good Stock To Buy?

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  • ABMD

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ABIOMED, Inc. (NASDAQ:ABMD).

Is ABMD a good stock to buy? ABIOMED, Inc. (NASDAQ:ABMD) shareholders have witnessed a decrease in enthusiasm from smart money of late. ABIOMED, Inc. (NASDAQ:ABMD) was in 24 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that ABMD isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to view the latest hedge fund action surrounding ABIOMED, Inc. (NASDAQ:ABMD).

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

At second quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ABMD over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in ABIOMED, Inc. (NASDAQ:ABMD), worth close to $524 million, corresponding to 0.7% of its total 13F portfolio. Coming in second is Palo Alto Investors, which holds a $182.3 million position; the fund has 10% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Cliff Asness's AQR Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to ABIOMED, Inc. (NASDAQ:ABMD), around 10.04% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, designating 1.38 percent of its 13F equity portfolio to ABMD.

Due to the fact that ABIOMED, Inc. (NASDAQ:ABMD) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedge funds who sold off their positions entirely heading into Q3. Interestingly, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest investment of the "upper crust" of funds watched by Insider Monkey, worth about $24.7 million in stock. Frank Fu's fund, CaaS Capital, also dumped its stock, about $4.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q3.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ABIOMED, Inc. (NASDAQ:ABMD) but similarly valued. We will take a look at Oak Street Health, Inc. (NYSE:OSH), Aluminum Corp. of China Limited (NYSE:ACH), The J.M. Smucker Company (NYSE:SJM), Continental Resources, Inc. (NYSE:CLR), Alliant Energy Corporation (NASDAQ:LNT), FMC Corporation (NYSE:FMC), and New Oriental Education & Technology Group Inc. (NYSE:EDU). All of these stocks' market caps are closest to ABMD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OSH,33,561397,2 ACH,4,8000,1 SJM,34,580514,1 CLR,23,172410,0 LNT,16,70771,3 FMC,33,372160,1 EDU,39,590421,-6 Average,26,336525,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $337 million. That figure was $899 million in ABMD's case. New Oriental Education & Technology Group Inc. (NYSE:EDU) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. ABIOMED, Inc. (NASDAQ:ABMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABMD is 52.1. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on ABMD as the stock returned 12.8% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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