In this article you are going to find out whether hedge funds think Inari Medical, Inc. (NASDAQ:NARI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is NARI a good stock to buy now? Prominent investors were getting less optimistic. The number of bullish hedge fund positions were trimmed by 5 lately. Inari Medical, Inc. (NASDAQ:NARI) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 19. Our calculations also showed that NARI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 19 hedge funds in our database with NARI positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are plenty of methods stock traders have at their disposal to size up publicly traded companies. A pair of the less known methods are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can trounce the S&P 500 by a healthy margin (see the details here).
Brad Farber Atika Capital
Brad Farber of Atika Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we're going to take a gander at the recent hedge fund action regarding Inari Medical, Inc. (NASDAQ:NARI).
Do Hedge Funds Think NARI Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NARI over the last 21 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Inari Medical, Inc. (NASDAQ:NARI) was held by Perceptive Advisors, which reported holding $58.6 million worth of stock at the end of September. It was followed by Driehaus Capital with a $10.3 million position. Other investors bullish on the company included Point72 Asset Management, Intrinsic Edge Capital, and Adage Capital Management. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Inari Medical, Inc. (NASDAQ:NARI), around 0.85% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 0.47 percent of its 13F equity portfolio to NARI.
Judging by the fact that Inari Medical, Inc. (NASDAQ:NARI) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers who were dropping their positions entirely in the third quarter. Intriguingly, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management dropped the biggest stake of the 750 funds followed by Insider Monkey, worth about $3.9 million in stock, and Guy Levy's Soleus Capital was right behind this move, as the fund said goodbye to about $3.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Inari Medical, Inc. (NASDAQ:NARI). We will take a look at Air Lease Corp (NYSE:AL), Vicor Corp (NASDAQ:VICR), ASGN Incorporated (NYSE:ASGN), Western Midstream Partners, LP (NYSE:WES), frontdoor, inc. (NASDAQ:FTDR), Scientific Games Corp (NASDAQ:SGMS), and Ardagh Group S.A. (NYSE:ARD). All of these stocks' market caps are similar to NARI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AL,20,608764,-2 VICR,20,75016,1 ASGN,21,73967,8 WES,10,65743,-1 FTDR,38,694601,-3 SGMS,25,990729,1 ARD,7,57156,0 Average,20.1,366568,0.6 [/table]
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $106 million in NARI's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 7 bullish hedge fund positions. Inari Medical, Inc. (NASDAQ:NARI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NARI is 33.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately NARI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NARI investors were disappointed as the stock returned -4.9% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
