With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Edwards Lifesciences Corporation (NYSE:EW).
Is EW stock a buy or sell? Edwards Lifesciences Corporation (NYSE:EW) was in 38 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 49. EW investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 46 hedge funds in our database with EW holdings at the end of September. Our calculations also showed that EW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s check out the recent hedge fund action encompassing Edwards Lifesciences Corporation (NYSE:EW).
Do Hedge Funds Think EW Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 45 hedge funds with a bullish position in EW a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
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 $508.9 million, accounting for 0.4% of its total 13F portfolio. The second most bullish fund manager is OrbiMed Advisors, holding a $93.6 million position; 0.8% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish contain Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position 11 Capital Partners allocated the biggest weight to Edwards Lifesciences Corporation (NYSE:EW), around 5.52% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, dishing out 2.71 percent of its 13F equity portfolio to EW.
Due to the fact that Edwards Lifesciences Corporation (NYSE:EW) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies who were dropping their entire stakes in the fourth quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the biggest position of the 750 funds tracked by Insider Monkey, worth close to $9.5 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also cut its stock, about $3.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds in the fourth quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Edwards Lifesciences Corporation (NYSE:EW) but similarly valued. These stocks are PetroChina Company Limited (NYSE:PTR), Itau Unibanco Holding SA (NYSE:ITUB), HCA Healthcare Inc (NYSE:HCA), Dell Technologies Inc. (NYSE:DELL), Analog Devices, Inc. (NASDAQ:ADI), Equinor ASA (NYSE:EQNR), and Moody’s Corporation (NYSE:MCO). This group of stocks’ market valuations resemble EW’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTR,5,61529,-1 ITUB,19,451744,3 HCA,73,3564991,2 DELL,50,3909030,7 ADI,58,5319785,6 EQNR,18,238582,-2 MCO,59,11352402,-1 Average,40.3,3556866,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $3557 million. That figure was $1243 million in EW’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 5 bullish hedge fund positions. Edwards Lifesciences Corporation (NYSE:EW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EW is 44.5. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately EW wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); EW investors were disappointed as the stock returned -13% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.