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Did Hedge Funds Drop The Ball On LeMaitre Vascular Inc (LMAT) ?

Abigail Fisher

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 LeMaitre Vascular Inc (NASDAQ:LMAT).

LeMaitre Vascular Inc (NASDAQ:LMAT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of the second quarter of 2019. 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 Ultra Clean Holdings Inc (NASDAQ:UCTT), Crossamerica Partners LP (NYSE:CAPL), and GameStop Corp. (NYSE:GME) to gather more data points. Our calculations also showed that LMAT 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.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

LMAT_oct2019
LMAT_oct2019

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 glance at the key hedge fund action regarding LeMaitre Vascular Inc (NASDAQ:LMAT).

What have hedge funds been doing with LeMaitre Vascular Inc (NASDAQ:LMAT)?

Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LMAT over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TUDOR INVESTMENT CORP
TUDOR INVESTMENT CORP

The largest stake in LeMaitre Vascular Inc (NASDAQ:LMAT) was held by Millennium Management, which reported holding $7.8 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $3.8 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and AQR Capital Management.

Due to the fact that LeMaitre Vascular Inc (NASDAQ:LMAT) has witnessed declining sentiment from the smart money, logic holds that there exists a select few hedge funds who were dropping their entire stakes last quarter. Interestingly, Israel Englander's Millennium Management sold off the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $0.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $0.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as LeMaitre Vascular Inc (NASDAQ:LMAT) but similarly valued. We will take a look at Ultra Clean Holdings Inc (NASDAQ:UCTT), Crossamerica Partners LP (NYSE:CAPL), GameStop Corp. (NYSE:GME), and Rosetta Stone Inc (NYSE:RST). All of these stocks' market caps resemble LMAT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UCTT,11,60376,2 CAPL,1,6327,-3 GME,27,117149,0 RST,12,110982,-7 Average,12.75,73709,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $20 million in LMAT's case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. LeMaitre Vascular Inc (NASDAQ:LMAT) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on LMAT as the stock returned 22.5% during the same time frame and outperformed the market by an even larger margin.

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

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