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In this article you are going to find out whether hedge funds think Cardiovascular Systems Inc (NASDAQ:CSII) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is CSII a good stock to buy now? The smart money was buying. The number of bullish hedge fund positions increased by 2 lately. Cardiovascular Systems Inc (NASDAQ:CSII) was in 22 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CSII isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Robert G. Moses of RGM Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a gander at the latest hedge fund action encompassing Cardiovascular Systems Inc (NASDAQ:CSII).
Do Hedge Funds Think CSII Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CSII over the last 21 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Cardiovascular Systems Inc (NASDAQ:CSII). Renaissance Technologies has a $65.5 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $20.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Robert G. Moses's RGM Capital, Phill Gross and Robert Atchinson's Adage Capital Management and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position DAFNA Capital Management allocated the biggest weight to Cardiovascular Systems Inc (NASDAQ:CSII), around 1.93% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 0.97 percent of its 13F equity portfolio to CSII.
Consequently, key money managers have jumped into Cardiovascular Systems Inc (NASDAQ:CSII) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Cardiovascular Systems Inc (NASDAQ:CSII). Citadel Investment Group had $20.6 million invested in the company at the end of the quarter. Robert G. Moses's RGM Capital also made a $12.9 million investment in the stock during the quarter. The following funds were also among the new CSII investors: Phill Gross and Robert Atchinson's Adage Capital Management, Michael Castor's Sio Capital, and Israel Englander's Millennium Management.
Let's now take a look at hedge fund activity in other stocks similar to Cardiovascular Systems Inc (NASDAQ:CSII). These stocks are BioTelemetry, Inc. (NASDAQ:BEAT), Rambus Inc. (NASDAQ:RMBS), Innospec Inc. (NASDAQ:IOSP), USANA Health Sciences, Inc. (NYSE:USNA), Baozun Inc (NASDAQ:BZUN), SeaWorld Entertainment Inc (NYSE:SEAS), and Mueller Industries, Inc. (NYSE:MLI). This group of stocks' market values are closest to CSII's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEAT,17,88893,1 RMBS,19,167579,1 IOSP,21,74483,3 USNA,18,202824,-1 BZUN,21,72825,6 SEAS,32,797374,5 MLI,20,185077,2 Average,21.1,227008,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $155 million in CSII's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand BioTelemetry, Inc. (NASDAQ:BEAT) is the least popular one with only 17 bullish hedge fund positions. Cardiovascular Systems Inc (NASDAQ:CSII) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSII is 53.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately CSII wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CSII were disappointed as the stock returned -4.3% since the end of September (through 12/14) 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 so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.