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Were Hedge Funds Right About Betting On ViewRay, Inc. (VRAY)?

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Is ViewRay, Inc. (NASDAQ:VRAY) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is ViewRay, Inc. (NASDAQ:VRAY) a bargain? Hedge funds were becoming hopeful. The number of bullish hedge fund bets improved by 4 in recent months. ViewRay, Inc. (NASDAQ:VRAY) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 23. Our calculations also showed that VRAY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management
Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 peek at the key hedge fund action regarding ViewRay, Inc. (NASDAQ:VRAY).

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

At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VRAY over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VRAY A Good Stock To Buy?
Is VRAY A Good Stock To Buy?

The largest stake in ViewRay, Inc. (NASDAQ:VRAY) was held by Hudson Executive Capital, which reported holding $64.3 million worth of stock at the end of December. It was followed by Pura Vida Investments with a $41.9 million position. Other investors bullish on the company included Tamarack Capital Management, Royce & Associates, and Millennium Management. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to ViewRay, Inc. (NASDAQ:VRAY), around 3.99% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, designating 2.19 percent of its 13F equity portfolio to VRAY.

As aggregate interest increased, key hedge funds have jumped into ViewRay, Inc. (NASDAQ:VRAY) headfirst. Tamarack Capital Management, managed by Justin John Ferayorni, initiated the largest position in ViewRay, Inc. (NASDAQ:VRAY). Tamarack Capital Management had $10.7 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $4.2 million position during the quarter. The following funds were also among the new VRAY investors: Paul Tudor Jones's Tudor Investment Corp, Cliff Asness's AQR Capital Management, and Greg Eisner's Engineers Gate Manager.

Let's now take a look at hedge fund activity in other stocks similar to ViewRay, Inc. (NASDAQ:VRAY). These stocks are Gossamer Bio, Inc. (NASDAQ:GOSS), Ethan Allen Interiors Inc. (NYSE:ETH), Qutoutiao Inc. (NASDAQ:QTT), Tian Ruixiang Holdings Ltd (NASDAQ:TIRX), The ExOne Company (NASDAQ:XONE), Heidrick & Struggles International, Inc. (NASDAQ:HSII), and Bright Scholar Education Holdings Limited (NYSE:BEDU). All of these stocks' market caps are closest to VRAY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOSS,19,158211,-1 ETH,13,45423,-1 QTT,4,2833,1 TIRX,1,763,1 XONE,8,110929,-2 HSII,17,111444,5 BEDU,7,65735,1 Average,9.9,70763,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.9 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $154 million in VRAY's case. Gossamer Bio, Inc. (NASDAQ:GOSS) is the most popular stock in this table. On the other hand Tian Ruixiang Holdings Ltd (NASDAQ:TIRX) is the least popular one with only 1 bullish hedge fund positions. ViewRay, Inc. (NASDAQ:VRAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRAY 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 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on VRAY as the stock returned 48.5% since the end of Q1 (through 7/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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