Were Hedge Funds Right About STAAR Surgical Company (STAA)?
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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards STAAR Surgical Company (NASDAQ:STAA).
STAAR Surgical Company (NASDAQ:STAA) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 24. STAA has experienced a decrease in activity from the world's largest hedge funds of late. There were 17 hedge funds in our database with STAA holdings at the end of December. Our calculations also showed that STAA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Louis Navellier of Navellier & Associates
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. Now let's take a look at the fresh hedge fund action encompassing STAAR Surgical Company (NASDAQ:STAA).
Do Hedge Funds Think STAA Is A Good Stock To Buy Now?
At first quarter's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in STAA over the last 23 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.
The largest stake in STAAR Surgical Company (NASDAQ:STAA) was held by Broadwood Capital, which reported holding $1006 million worth of stock at the end of December. It was followed by Palo Alto Investors with a $191.2 million position. Other investors bullish on the company included Pura Vida Investments, Marshall Wace LLP, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to STAAR Surgical Company (NASDAQ:STAA), around 53.49% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 10.89 percent of its 13F equity portfolio to STAA.
Because STAAR Surgical Company (NASDAQ:STAA) has witnessed falling interest from the smart money, we can see that there lies a certain "tier" of hedgies who sold off their entire stakes heading into Q2. At the top of the heap, Israel Englander's Millennium Management dumped the largest stake of the "upper crust" of funds tracked by Insider Monkey, comprising close to $9.5 million in stock, and Xiaomeng Tong's Boyu Capital was right behind this move, as the fund said goodbye to about $2.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q2.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as STAAR Surgical Company (NASDAQ:STAA) but similarly valued. We will take a look at Lazard Ltd (NYSE:LAZ), Rackspace Technology, Inc. (NASDAQ:RXT), Spirit Realty Capital Inc (NYSE:SRC), American Eagle Outfitters Inc. (NYSE:AEO), AppFolio Inc (NASDAQ:APPF), Graphic Packaging Holding Company (NYSE:GPK), and Hawaiian Electric Industries, Inc. (NYSE:HE). This group of stocks' market valuations are closest to STAA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LAZ,19,770857,-1 RXT,11,125806,-3 SRC,18,166994,1 AEO,43,948063,4 APPF,12,394366,-7 GPK,21,476673,-5 HE,12,196022,-6 Average,19.4,439826,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $1291 million in STAA's case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 11 bullish hedge fund positions. STAAR Surgical Company (NASDAQ:STAA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STAA is 31.8. 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. A small number of hedge funds were also right about betting on STAA as the stock returned 25.1% since the end of the first quarter (through 7/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
