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AtriCure Inc. (ATRC) Fell Out Of Favor With Hedge Funds?

·6 min read

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding AtriCure Inc. (NASDAQ:ATRC).

Hedge fund interest in AtriCure Inc. (NASDAQ:ATRC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ATRC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 Installed Building Products Inc (NYSE:IBP), GATX Corporation (NYSE:GATX), and ZipRecruiter Inc. (NYSE:ZIP) to gather more data points.

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. Now let's take a glance at the key hedge fund action surrounding AtriCure Inc. (NASDAQ:ATRC).

Millennium Management, Catapult Capital Management
Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

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

At Q3's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in ATRC a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the largest position in AtriCure Inc. (NASDAQ:ATRC). Polar Capital has a $35.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $34.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish contain Efrem Kamen's Pura Vida Investments, Jerome Pfund and Michael Sjostrom's Sectoral Asset Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to AtriCure Inc. (NASDAQ:ATRC), around 2.57% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 2 percent of its 13F equity portfolio to ATRC.

Since AtriCure Inc. (NASDAQ:ATRC) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies who were dropping their positions entirely in the third quarter. Intriguingly, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, totaling about $0.7 million in stock. Lee Ainslie's fund, Maverick Capital, also dropped its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as AtriCure Inc. (NASDAQ:ATRC) but similarly valued. These stocks are Installed Building Products Inc (NYSE:IBP), GATX Corporation (NYSE:GATX), ZipRecruiter Inc. (NYSE:ZIP), Integral Ad Science Holding Corp. (NASDAQ:IAS), Insmed Incorporated (NASDAQ:INSM), WD-40 Company (NASDAQ:WDFC), and Federated Hermes, Inc. (NYSE:FHI). All of these stocks' market caps are similar to ATRC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IBP,15,38662,3 GATX,12,192518,-5 ZIP,10,87951,10 IAS,19,2094672,19 INSM,18,562511,-4 WDFC,19,136818,2 FHI,23,224348,-2 Average,16.6,476783,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $243 million in ATRC's case. Federated Hermes, Inc. (NYSE:FHI) is the most popular stock in this table. On the other hand ZipRecruiter Inc. (NYSE:ZIP) is the least popular one with only 10 bullish hedge fund positions. AtriCure Inc. (NASDAQ:ATRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATRC is 72.5. 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 ATRC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ATRC were disappointed as the stock returned 0% since the end of September (through 12/31) 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 many of these stocks already outperformed the market since 2019.

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