It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like AtriCure Inc. (NASDAQ:ATRC).
AtriCure Inc. (NASDAQ:ATRC) was in 20 hedge funds' portfolios at the end of the second quarter of 2019. ATRC has experienced a decrease in support from the world's most elite money managers recently. There were 25 hedge funds in our database with ATRC positions at the end of the previous quarter. Our calculations also showed that ATRC 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.
Today there are a large number of gauges shareholders employ to appraise their holdings. A couple of the most innovative gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outpace the S&P 500 by a significant margin (see the details here).
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 take a look at the new hedge fund action encompassing AtriCure Inc. (NASDAQ:ATRC).
How have hedgies been trading AtriCure Inc. (NASDAQ:ATRC)?
Heading into the third quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in ATRC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Tamarack Capital Management held the most valuable stake in AtriCure Inc. (NASDAQ:ATRC), which was worth $21.2 million at the end of the second quarter. On the second spot was GLG Partners which amassed $13.7 million worth of shares. Moreover, Royce & Associates, Sectoral Asset Management, and DAFNA Capital Management were also bullish on AtriCure Inc. (NASDAQ:ATRC), allocating a large percentage of their portfolios to this stock.
Seeing as AtriCure Inc. (NASDAQ:ATRC) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedgies who sold off their full holdings last quarter. It's worth mentioning that Jeremy Green's Redmile Group said goodbye to the largest stake of the 750 funds followed by Insider Monkey, comprising about $8.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also said goodbye to its stock, about $2.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let's now review hedge fund activity in other stocks similar to AtriCure Inc. (NASDAQ:ATRC). These stocks are Bright Scholar Education Holdings Limited (NYSE:BEDU), Marcus & Millichap Inc (NYSE:MMI), Rubius Therapeutics, Inc. (NASDAQ:RUBY), and Carbon Black, Inc. (NASDAQ:CBLK). 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 BEDU,9,72225,0 MMI,12,96656,0 RUBY,5,21538,0 CBLK,17,109220,-2 Average,10.75,74910,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $116 million in ATRC's case. Carbon Black, Inc. (NASDAQ:CBLK) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks AtriCure Inc. (NASDAQ:ATRC) is more popular among hedge funds. 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 ATRC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATRC were disappointed as the stock returned -16.4% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey