Does ABIOMED, Inc. (NASDAQ:ABMD) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
ABIOMED, Inc. (NASDAQ:ABMD) was in 28 hedge funds' portfolios at the end of the second quarter of 2019. ABMD shareholders have witnessed a decrease in hedge fund sentiment lately. There were 33 hedge funds in our database with ABMD positions at the end of the previous quarter. Our calculations also showed that ABMD isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike this former hedge fund manager 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 latest hedge fund action regarding ABIOMED, Inc. (NASDAQ:ABMD).
What does smart money think about ABIOMED, Inc. (NASDAQ:ABMD)?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in ABMD a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in ABIOMED, Inc. (NASDAQ:ABMD), which was worth $633.4 million at the end of the second quarter. On the second spot was Palo Alto Investors which amassed $184 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and Millennium Management were also bullish on ABIOMED, Inc. (NASDAQ:ABMD), allocating a large percentage of their portfolios to this stock.
Due to the fact that ABIOMED, Inc. (NASDAQ:ABMD) has faced a decline in interest from the smart money, it's safe to say that there were a few hedgies who sold off their entire stakes by the end of the second quarter. Interestingly, Principal Global Investors's Columbus Circle Investors dropped the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling about $31.7 million in stock, and Kamran Moghtaderi's Eversept Partners was right behind this move, as the fund cut about $7.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to ABIOMED, Inc. (NASDAQ:ABMD). These stocks are Nomura Holdings, Inc. (NYSE:NMR), Alliant Energy Corporation (NASDAQ:LNT), Universal Health Services, Inc. (NYSE:UHS), and Masco Corporation (NYSE:MAS). This group of stocks' market values are closest to ABMD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NMR,7,23320,2 LNT,26,652790,9 UHS,24,713982,-5 MAS,45,1083854,5 Average,25.5,618487,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $618 million. That figure was $1005 million in ABMD's case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 7 bullish hedge fund positions. ABIOMED, Inc. (NASDAQ:ABMD) is not the most popular stock in this group but hedge fund interest is still above average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ABMD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ABMD were disappointed as the stock returned -31.7% 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.