We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Masimo Corporation (NASDAQ:MASI).
Masimo Corporation (NASDAQ:MASI) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. MASI was in 27 hedge funds’ portfolios at the end of September. There were 28 hedge funds in our database with MASI positions at the end of the previous quarter. Our calculations also showed that MASI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the fresh hedge fund action regarding Masimo Corporation (NASDAQ:MASI).
What have hedge funds been doing with Masimo Corporation (NASDAQ:MASI)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in MASI a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Masimo Corporation (NASDAQ:MASI), with a stake worth $76.9 million reported as of the end of September. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $23.7 million. Renaissance Technologies, GAMCO Investors, and Marshall Wace were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Masimo Corporation (NASDAQ:MASI), around 1.05% of its portfolio. Birchview Capital is also relatively very bullish on the stock, designating 0.79 percent of its 13F equity portfolio to MASI.
Judging by the fact that Masimo Corporation (NASDAQ:MASI) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that elected to cut their full holdings last quarter. It’s worth mentioning that Robert B. Gillam’s McKinley Capital Management said goodbye to the largest investment of the 750 funds followed by Insider Monkey, valued at about $3.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $1.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Masimo Corporation (NASDAQ:MASI) but similarly valued. These stocks are Newell Brands Inc. (NASDAQ:NWL), China Eastern Airlines Corp. Ltd. (NYSE:CEA), The Mosaic Company (NYSE:MOS), and Universal Display Corporation (NASDAQ:OLED). This group of stocks’ market values match MASI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWL | 29 | 1434678 | 0 |
| CEA | 1 | 657 | 0 |
| MOS | 17 | 682952 | -11 |
| OLED | 23 | 231521 | 6 |
| Average | 17.5 | 587452 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $201 million in MASI’s case. Newell Brands Inc. (NASDAQ:NWL) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. Masimo Corporation (NASDAQ:MASI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MASI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MASI were disappointed as the stock returned 4.2% during the fourth quarter (through the end of November) 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
