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Is ESTA A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Establishment Labs Holdings Inc. (NASDAQ:ESTA) based on that data.

Is ESTA a good stock to buy now? Establishment Labs Holdings Inc. (NASDAQ:ESTA) was in 12 hedge funds' portfolios at the end of September. The all time high for this statistics is 14. ESTA has seen an increase in enthusiasm from smart money in recent months. There were 11 hedge funds in our database with ESTA positions at the end of the second quarter. Our calculations also showed that ESTA 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.

If you'd ask most investors, hedge funds are assumed to be unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds trading at the moment, Our researchers look at the bigwigs of this group, about 850 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry's total capital, and by paying attention to their top picks, Insider Monkey has come up with many investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Joseph Edelman of Perceptive Advisors
Joseph Edelman of Perceptive Advisors

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. With all of this in mind let's view the recent hedge fund action surrounding Establishment Labs Holdings Inc. (NASDAQ:ESTA).

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

At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ESTA over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ESTA A Good Stock To Buy?
Is ESTA A Good Stock To Buy?

The largest stake in Establishment Labs Holdings Inc. (NASDAQ:ESTA) was held by Nantahala Capital Management, which reported holding $35.6 million worth of stock at the end of September. It was followed by Pura Vida Investments with a $22.1 million position. Other investors bullish on the company included Perceptive Advisors, Magnetar Capital, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Establishment Labs Holdings Inc. (NASDAQ:ESTA), around 1.14% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, setting aside 1.09 percent of its 13F equity portfolio to ESTA.

As industrywide interest jumped, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, assembled the largest position in Establishment Labs Holdings Inc. (NASDAQ:ESTA). Winton Capital Management had $0.2 million invested in the company at the end of the quarter.

Let's now review hedge fund activity in other stocks similar to Establishment Labs Holdings Inc. (NASDAQ:ESTA). We will take a look at QCR Holdings, Inc. (NASDAQ:QCRH), Avid Bioservices, Inc. (NASDAQ:CDMO), Napco Security Technologies Inc (NASDAQ:NSSC), MannKind Corporation (NASDAQ:MNKD), First Financial Corp (NASDAQ:THFF), Global Cord Blood Corp (NYSE:CO), and TherapeuticsMD Inc (NASDAQ:TXMD). This group of stocks' market values are closest to ESTA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QCRH,11,41965,0 CDMO,16,51583,1 NSSC,2,1228,-6 MNKD,7,5789,-6 THFF,10,23201,2 CO,8,23946,-3 TXMD,11,36272,1 Average,9.3,26283,-1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $79 million in ESTA's case. Avid Bioservices, Inc. (NASDAQ:CDMO) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 2 bullish hedge fund positions. Establishment Labs Holdings Inc. (NASDAQ:ESTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESTA is 67.4. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ESTA as the stock returned 65.9% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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