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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cardiovascular Systems Inc (NASDAQ:CSII) and determine whether hedge funds skillfully traded this stock.
Cardiovascular Systems Inc (NASDAQ:CSII) investors should be aware of an increase in hedge fund interest of late. Cardiovascular Systems Inc (NASDAQ:CSII) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that CSII isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
At the moment there are tons of metrics shareholders use to value stocks. Some of the most under-the-radar metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce their index-focused peers by a solid margin (see the details here).
Nathan Fischel of DAFNA Capital Management
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's analyze the fresh hedge fund action regarding Cardiovascular Systems Inc (NASDAQ:CSII).
How are hedge funds trading Cardiovascular Systems Inc (NASDAQ:CSII)?
Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CSII over the last 20 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in Cardiovascular Systems Inc (NASDAQ:CSII), worth close to $55.9 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Sectoral Asset Management, led by Jerome Pfund and Michael Sjostrom, holding a $20.5 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain James E. Flynn's Deerfield Management, Nathan Fischel's DAFNA Capital Management and Brandon Haley's Holocene Advisors. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to Cardiovascular Systems Inc (NASDAQ:CSII), around 1.88% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, earmarking 1.38 percent of its 13F equity portfolio to CSII.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Deerfield Management, managed by James E. Flynn, established the most valuable position in Cardiovascular Systems Inc (NASDAQ:CSII). Deerfield Management had $20.5 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $4.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Paul Tudor Jones's Tudor Investment Corp, and Jonathan Auerbach's Hound Partners.
Let's check out hedge fund activity in other stocks similar to Cardiovascular Systems Inc (NASDAQ:CSII). These stocks are Shutterstock Inc (NYSE:SSTK), La-Z-Boy Incorporated (NYSE:LZB), Passage Bio, Inc. (NASDAQ:PASG), PDC Energy Inc (NASDAQ:PDCE), The ODP Corporation (NASDAQ:ODP), Coeur Mining, Inc. (NYSE:CDE), and Heartland Financial USA Inc (NASDAQ:HTLF). All of these stocks' market caps resemble CSII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSTK,16,88271,3 LZB,21,51265,0 PASG,13,474820,-4 PDCE,23,210307,-2 ODP,18,107793,1 CDE,14,48945,0 HTLF,5,6042,-1 Average,15.7,141063,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $133 million in CSII's case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 5 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 37.3. 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 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on CSII as the stock returned 24.7% during Q3 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.