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Hedge Funds Are Coming Back To NuVasive, Inc. (NUVA)

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  • NUVA

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards NuVasive, Inc. (NASDAQ:NUVA) to find out whether there were any major changes in hedge funds' views.

Is NuVasive, Inc. (NASDAQ:NUVA) an attractive investment now? The best stock pickers were buying. The number of bullish hedge fund positions moved up by 3 recently. NuVasive, Inc. (NASDAQ:NUVA) was in 23 hedge funds' portfolios at the end of June. The all time high for this statistic is 37. Our calculations also showed that NUVA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ken Fisher FISHER ASSET MANAGEMENT
Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a glance at the key hedge fund action surrounding NuVasive, Inc. (NASDAQ:NUVA).

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

At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NUVA over the last 24 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David Paradice's Paradice Investment Management has the most valuable position in NuVasive, Inc. (NASDAQ:NUVA), worth close to $63.1 million, comprising 2.9% of its total 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which holds a $52.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Ken Griffin's Citadel Investment Group, John Overdeck and David Siegel's Two Sigma Advisors and Steven Boyd's Armistice Capital. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to NuVasive, Inc. (NASDAQ:NUVA), around 2.93% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.22 percent of its 13F equity portfolio to NUVA.

Now, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in NuVasive, Inc. (NASDAQ:NUVA). Point72 Asset Management had $13.8 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also initiated a $3.5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Greg Eisner's Engineers Gate Manager, and Jinghua Yan's TwinBeech Capital.

Let's now take a look at hedge fund activity in other stocks similar to NuVasive, Inc. (NASDAQ:NUVA). These stocks are Outfront Media Inc. (REIT) (NYSE:OUT), The Simply Good Foods Company (NASDAQ:SMPL), Insperity Inc (NYSE:NSP), Moelis & Company (NYSE:MC), Allegiant Travel Company (NASDAQ:ALGT), Chimera Investment Corporation (NYSE:CIM), and Navient Corp (NASDAQ:NAVI). All of these stocks' market caps are similar to NUVA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OUT,31,701645,-10 SMPL,17,212669,-5 NSP,20,220013,0 MC,18,146026,-1 ALGT,29,390264,7 CIM,16,105209,1 NAVI,17,204809,-6 Average,21.1,282948,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $283 million. That figure was $287 million in NUVA's case. Outfront Media Inc. (REIT) (NYSE:OUT) is the most popular stock in this table. On the other hand Chimera Investment Corporation (NYSE:CIM) is the least popular one with only 16 bullish hedge fund positions. NuVasive, Inc. (NASDAQ:NUVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NUVA is 50. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately NUVA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NUVA were disappointed as the stock returned -15.1% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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