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Hedge Funds Are Crazy About Inari Medical, Inc. (NARI)

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In this article you are going to find out whether hedge funds think Inari Medical, Inc. (NASDAQ:NARI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Inari Medical, Inc. (NASDAQ:NARI) has experienced an increase in hedge fund sentiment in recent months. Inari Medical, Inc. (NASDAQ:NARI) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NARI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joseph Edelman of Perceptive Advisors
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, 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. Keeping this in mind we're going to take a look at the key hedge fund action encompassing Inari Medical, Inc. (NASDAQ:NARI).

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

At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NARI over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Darsana Capital Partners held the most valuable stake in Inari Medical, Inc. (NASDAQ:NARI), which was worth $137.6 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $92.3 million worth of shares. Millennium Management, Perceptive Advisors, and Balyasny 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 Darsana Capital Partners allocated the biggest weight to Inari Medical, Inc. (NASDAQ:NARI), around 3.91% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, dishing out 1.99 percent of its 13F equity portfolio to NARI.

As one would reasonably expect, some big names have jumped into Inari Medical, Inc. (NASDAQ:NARI) headfirst. Point72 Asset Management, managed by Steve Cohen, created the largest position in Inari Medical, Inc. (NASDAQ:NARI). Point72 Asset Management had $13.4 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also made a $8.5 million investment in the stock during the quarter. The following funds were also among the new NARI investors: Phill Gross and Robert Atchinson's Adage Capital Management, John Osterweis's Osterweis Capital Management, and Ray Dalio's Bridgewater Associates.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Inari Medical, Inc. (NASDAQ:NARI) but similarly valued. These stocks are Bloom Energy Corporation (NYSE:BE), Hawaiian Electric Industries, Inc. (NYSE:HE), MGIC Investment Corporation (NYSE:MTG), Trupanion Inc (NASDAQ:TRUP), Vicor Corp (NASDAQ:VICR), Sendas Distribuidora S.A. (NYSE:ASAI), and UFP Industries, Inc. (NASDAQ:UFPI). This group of stocks' market values are similar to NARI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BE,20,76845,-2 HE,14,76206,2 MTG,27,265101,-1 TRUP,14,294926,-3 VICR,13,123682,-7 ASAI,7,14608,1 UFPI,13,129142,-3 Average,15.4,140073,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $405 million in NARI's case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Sendas Distribuidora S.A. (NYSE:ASAI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Inari Medical, Inc. (NASDAQ:NARI) is more popular among hedge funds. Our overall hedge fund sentiment score for NARI is 90. 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 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately NARI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NARI were disappointed as the stock returned -7.6% since the end of the second quarter (through 10/15) 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 most of these stocks already outperformed the market since 2019.

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