At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Integra Lifesciences Holdings Corp (NASDAQ:IART).
Integra Lifesciences Holdings Corp (NASDAQ:IART) has seen an increase in support from the world's most elite money managers of late. Our calculations also showed that IART isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
[caption id="attachment_26335" align="aligncenter" width="399"] Ken Fisher of Fisher Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the recent hedge fund action regarding Integra Lifesciences Holdings Corp (NASDAQ:IART).
What have hedge funds been doing with Integra Lifesciences Holdings Corp (NASDAQ:IART)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IART over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Integra Lifesciences Holdings Corp (NASDAQ:IART), which was worth $31.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $22.1 million worth of shares. Millennium Management, Citadel Investment Group, and Impax Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Integra Lifesciences Holdings Corp (NASDAQ:IART), around 0.24% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to IART.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Engineers Gate Manager, managed by Greg Eisner, created the most valuable position in Integra Lifesciences Holdings Corp (NASDAQ:IART). Engineers Gate Manager had $1.6 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $0.7 million position during the quarter. The following funds were also among the new IART investors: Mike Vranos's Ellington, Jinghua Yan's TwinBeech Capital, and Brandon Haley's Holocene Advisors.
Let's now take a look at hedge fund activity in other stocks similar to Integra Lifesciences Holdings Corp (NASDAQ:IART). We will take a look at Healthcare Realty Trust Inc (NYSE:HR), East West Bancorp, Inc. (NASDAQ:EWBC), Silicon Laboratories Inc. (NASDAQ:SLAB), and Deckers Outdoor Corp (NYSE:DECK). All of these stocks' market caps resemble IART's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HR,11,37769,-1 EWBC,25,180356,-4 SLAB,20,58924,-6 DECK,31,554069,-12 Average,21.75,207780,-5.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $107 million in IART's case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 11 bullish hedge fund positions. Integra Lifesciences Holdings Corp (NASDAQ:IART) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately IART wasn't nearly as popular as these 10 stocks and hedge funds that were betting on IART were disappointed as the stock returned 11.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.