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Is ICU Medical, Inc. (ICUI) A Good Stock To Buy?

Abigail Fisher

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

ICU Medical, Inc. (NASDAQ:ICUI) was in 15 hedge funds' portfolios at the end of the first quarter of 2019. ICUI has experienced a decrease in enthusiasm from smart money lately. There were 20 hedge funds in our database with ICUI positions at the end of the previous quarter. Our calculations also showed that ICUI isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

We're going to take a glance at the latest hedge fund action encompassing ICU Medical, Inc. (NASDAQ:ICUI).

What does smart money think about ICU Medical, Inc. (NASDAQ:ICUI)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in ICUI a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

ICUI_june2019

The largest stake in ICU Medical, Inc. (NASDAQ:ICUI) was held by Partner Fund Management, which reported holding $89.7 million worth of stock at the end of March. It was followed by AQR Capital Management with a $84.4 million position. Other investors bullish on the company included Millennium Management, Pura Vida Investments, and Fisher Asset Management.

Due to the fact that ICU Medical, Inc. (NASDAQ:ICUI) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of funds who sold off their full holdings heading into Q3. Interestingly, Jim Simons's Renaissance Technologies dropped the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $17.5 million in stock. Anand Parekh's fund, Alyeska Investment Group, also cut its stock, about $16.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds heading into Q3.

Let's also examine hedge fund activity in other stocks similar to ICU Medical, Inc. (NASDAQ:ICUI). We will take a look at Wyndham Hotels & Resorts, Inc. (NYSE:WH), Ashland Global Holdings Inc. (NYSE:ASH), SYNNEX Corporation (NYSE:SNX), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). This group of stocks' market values are closest to ICUI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WH,40,790556,3 ASH,30,1175282,-7 SNX,11,158063,0 HZNP,41,1304450,13 Average,30.5,857088,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $857 million. That figure was $329 million in ICUI's case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand SYNNEX Corporation (NYSE:SNX) is the least popular one with only 11 bullish hedge fund positions. ICU Medical, Inc. (NASDAQ:ICUI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ICUI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ICUI investors were disappointed as the stock returned 2.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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