In this article we will check out the progression of hedge fund sentiment towards Edwards Lifesciences Corporation (NYSE:EW) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Edwards Lifesciences Corporation (NYSE:EW) a sound investment today? Hedge funds are in an optimistic mood. The number of long hedge fund bets moved up by 4 lately. Our calculations also showed that EW 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). EW was in 49 hedge funds' portfolios at the end of the first quarter of 2020. There were 45 hedge funds in our database with EW holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="400"] Cliff Asness of AQR Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. 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 take a gander at the recent hedge fund action regarding Edwards Lifesciences Corporation (NYSE:EW).
What does smart money think about Edwards Lifesciences Corporation (NYSE:EW)?
Heading into the second quarter of 2020, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the fourth quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in EW a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher's Fisher Asset Management has the number one position in Edwards Lifesciences Corporation (NYSE:EW), worth close to $255.5 million, comprising 0.3% of its total 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $155.4 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions contain Cliff Asness's AQR Capital Management, Nicolai Tangen's Ako Capital and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Ako Capital allocated the biggest weight to Edwards Lifesciences Corporation (NYSE:EW), around 3% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, earmarking 2.84 percent of its 13F equity portfolio to EW.
Consequently, specific money managers have jumped into Edwards Lifesciences Corporation (NYSE:EW) headfirst. Holocene Advisors, managed by Brandon Haley, assembled the most outsized position in Edwards Lifesciences Corporation (NYSE:EW). Holocene Advisors had $79.3 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also initiated a $17 million position during the quarter. The following funds were also among the new EW investors: Michael Rockefeller and KarláKroeker's Woodline Partners, Henrik Rhenman's Rhenman & Partners Asset Management, and James Crichton's Hitchwood Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Edwards Lifesciences Corporation (NYSE:EW) but similarly valued. These stocks are L3Harris Technologies, Inc. (NASDAQ:LHX), Banco Santander, S.A. (NYSE:SAN), Honda Motor Co Ltd (NYSE:HMC), and America Movil SAB de CV (NYSE:AMX). All of these stocks' market caps resemble EW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LHX,43,1593570,-5 SAN,18,348505,-3 HMC,8,144471,-1 AMX,11,128726,-6 Average,20,553818,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $1405 million in EW's case. L3Harris Technologies, Inc. (NASDAQ:LHX) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Edwards Lifesciences Corporation (NYSE:EW) is more popular among hedge funds. 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 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on EW, though not to the same extent, as the stock returned 16% in Q2 (through May 22nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.