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 (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Invacare Corporation (NYSE:IVC) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Invacare Corporation (NYSE:IVC) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. IVC shareholders have witnessed a decrease in hedge fund sentiment recently. There were 19 hedge funds in our database with IVC positions at the end of the first quarter. Our calculations also showed that IVC 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.
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Donald Sussman of Paloma Partners
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How are hedge funds trading Invacare Corporation (NYSE:IVC)?
At second quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IVC over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Invacare Corporation (NYSE:IVC), with a stake worth $14.5 million reported as of the end of September. Trailing Renaissance Technologies was Pura Vida Investments, which amassed a stake valued at $10.2 million. Royce & Associates, Millennium Management, and D E Shaw 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 North Run Capital allocated the biggest weight to Invacare Corporation (NYSE:IVC), around 3.23% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 1.92 percent of its 13F equity portfolio to IVC.
Seeing as Invacare Corporation (NYSE:IVC) has faced bearish sentiment from the smart money, we can see that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes in the second quarter. At the top of the heap, Andy Redleaf's Whitebox Advisors cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $3.2 million in stock, and J. Daniel Plants's Voce Capital was right behind this move, as the fund dropped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the second quarter.
Let's check out hedge fund activity in other stocks similar to Invacare Corporation (NYSE:IVC). We will take a look at Pure Cycle Corporation (NASDAQ:PCYO), Bioceres Crop Solutions Corp. (NYSE:BIOX), RISE Education Cayman Ltd (NASDAQ:REDU), Consolidated Water Co. Ltd. (NASDAQ:CWCO), XOMA Corp (NASDAQ:XOMA), Spirit of Texas Bancshares, Inc. (NASDAQ:STXB), and Genius Brands International, Inc. (NASDAQ:GNUS). This group of stocks' market valuations are similar to IVC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCYO,14,60014,0 BIOX,3,450,0 REDU,3,943,1 CWCO,9,16047,4 XOMA,12,98124,4 STXB,6,11897,2 GNUS,4,3619,3 Average,7.3,27299,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $53 million in IVC's case. Pure Cycle Corporation (NASDAQ:PCYO) is the most popular stock in this table. On the other hand Bioceres Crop Solutions Corp. (NYSE:BIOX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Invacare Corporation (NYSE:IVC) is more popular among hedge funds. Our overall hedge fund sentiment score for IVC is 79.7. 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 returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on IVC as the stock returned 18.1% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.