Hedge Funds Are Cashing Out Of Intuitive Surgical, Inc. (ISRG)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Intuitive Surgical, Inc. (NASDAQ:ISRG) based on that data and determine whether they were really smart about the stock.

Intuitive Surgical, Inc. (NASDAQ:ISRG) investors should pay attention to a decrease in hedge fund interest lately. Intuitive Surgical, Inc. (NASDAQ:ISRG) was in 43 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 51. There were 50 hedge funds in our database with ISRG holdings at the end of March. Our calculations also showed that ISRG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding Intuitive Surgical, Inc. (NASDAQ:ISRG).

How have hedgies been trading Intuitive Surgical, Inc. (NASDAQ:ISRG)?

At the end of June, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ISRG over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Intuitive Surgical, Inc. (NASDAQ:ISRG) was held by Fisher Asset Management, which reported holding $642.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $225.9 million position. Other investors bullish on the company included Adage Capital Management, AQR Capital Management, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 4.07% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, dishing out 3.49 percent of its 13F equity portfolio to ISRG.

Judging by the fact that Intuitive Surgical, Inc. (NASDAQ:ISRG) has witnessed falling interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who sold off their full holdings last quarter. At the top of the heap, Rajiv Jain’s GQG Partners said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $137.2 million in stock.  Renaissance Technologies, also dropped its stock, about $24.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 7 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intuitive Surgical, Inc. (NASDAQ:ISRG) but similarly valued. These stocks are Anthem Inc (NYSE:ANTM), Fiserv, Inc. (NASDAQ:FISV), Booking Holdings Inc. (NASDAQ:BKNG), Zoetis Inc (NYSE:ZTS), VMware, Inc. (NYSE:VMW), Automatic Data Processing (NASDAQ:ADP), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks’ market valuations are closest to ISRG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $2990 million. That figure was $1095 million in ISRG’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 42 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ISRG is 24.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on ISRG as the stock returned 28.3% since the end of June and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.