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Why ShockWave Medical Stock Jumped Today

By Keith Speights - Jan 5, 2021 at 4:24PM

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No news was good news for the medical device maker.

What happened

Shares of ShockWave Medical ( SWAV -4.29% ) were jumping 9.1% higher as of 3:47 p.m. EST after rising as much as 11.4% earlier in the day. The company didn't announce any news. Today's move appears to have possibly been fueled by institutional investors buying the stock.

So what

It's not all that unusual for a small healthcare stock to experience relatively big price swings on no news at all. Often when this happens, it's the result of major institutional investors such as mutual funds, hedge funds, or pension funds scooping up large quantities of the stock.

Hand holding pen pointing to stock chart on a computer screen.

Image source: Getty Images.

One key reason to suspect that's what is happening with ShockWave is the abnormally high trading volume in the stock this morning. The top 10 institutional investors with positions in ShockWave together own roughly 57% of its outstanding shares. When these investors add to their positions, it can create upward pressure on the stock price. 

What does it mean for regular investors if big institutions are indeed buying ShockWave? On one hand, nothing at all. It's not a good idea to buy or sell any stock just because someone else is, regardless of how much they're investing. On the other hand, rising institutional support is usually a good sign that a company's prospects are strong.

Now what

ShockWave could prove just how strong its prospects are when the company reports its 2020 fourth-quarter results in February. Look for significant revenue growth with the expansion of ShockWave's sales force and its increased U.S. and international market penetration.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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ShockWave Medical Stock Quote
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$165.13 (-4.29%) $-7.40

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