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Is Wright Medical Group N.V. (WMGI) Going to Burn These Hedge Funds?

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Wright Medical Group N.V. (NASDAQ:WMGI) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is Wright Medical Group N.V. (NASDAQ:WMGI) a superb investment today? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets decreased by 1 recently. Our calculations also showed that WMGI isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Samuel Isaly Orbimed Advisors

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the recent hedge fund action surrounding Wright Medical Group N.V. (NASDAQ:WMGI).

How have hedgies been trading Wright Medical Group N.V. (NASDAQ:WMGI)?

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in WMGI over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with WMGI Positions

Among these funds, OrbiMed Advisors held the most valuable stake in Wright Medical Group N.V. (NASDAQ:WMGI), which was worth $124.9 million at the end of the second quarter. On the second spot was Millennium Management which amassed $110.4 million worth of shares. Moreover, Fisher Asset Management, Palo Alto Investors, and Redmile Group were also bullish on Wright Medical Group N.V. (NASDAQ:WMGI), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Wright Medical Group N.V. (NASDAQ:WMGI) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers who sold off their full holdings last quarter. It's worth mentioning that Roberto Mignone's Bridger Management cut the largest investment of the 750 funds watched by Insider Monkey, valued at about $44.8 million in stock. Kris Jenner, Gordon Bussard, Graham McPhail's fund, Rock Springs Capital Management, also cut its stock, about $29 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Wright Medical Group N.V. (NASDAQ:WMGI) but similarly valued. We will take a look at Associated Banc-Corp (NYSE:ASB), Navistar International Corporation (NYSE:NAV), Corelogic Inc (NYSE:CLGX), and TCF Financial Corporation (NASDAQ:TCF). This group of stocks' market caps resemble WMGI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASB,19,204043,3 NAV,26,1425899,3 CLGX,23,333684,6 TCF,20,193696,-2 Average,22,539331,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $719 million in WMGI's case. Navistar International Corporation (NYSE:NAV) is the most popular stock in this table. On the other hand Associated Banc-Corp (NYSE:ASB) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Wright Medical Group N.V. (NASDAQ:WMGI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WMGI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WMGI were disappointed as the stock returned -30.8% during the third quarter 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 many of these stocks already outperformed the market in Q3.

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

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