Hedge Funds Are Crazy About Inspire Medical Systems, Inc. (INSP)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Inspire Medical Systems, Inc. (NYSE:INSP) based on those filings.

Is Inspire Medical Systems, Inc. (NYSE:INSP) the right investment to pursue these days? Investors who are in the know were in a bullish mood. The number of long hedge fund positions advanced by 4 in recent months. Inspire Medical Systems, Inc. (NYSE:INSP) was in 32 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that INSP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 28 hedge funds in our database with INSP positions at the end of the first quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Steven Cohen of Point72 Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. Keeping this in mind let’s take a glance at the latest hedge fund action surrounding Inspire Medical Systems, Inc. (NYSE:INSP).

Do Hedge Funds Think INSP Is A Good Stock To Buy Now?

At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in INSP over the last 24 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Inspire Medical Systems, Inc. (NYSE:INSP) was held by Marshall Wace LLP, which reported holding $84.3 million worth of stock at the end of June. It was followed by D E Shaw with a $66.6 million position. Other investors bullish on the company included Citadel Investment Group, Pura Vida Investments, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Inspire Medical Systems, Inc. (NYSE:INSP), around 4.41% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, dishing out 2.19 percent of its 13F equity portfolio to INSP.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, initiated the largest position in Inspire Medical Systems, Inc. (NYSE:INSP). Renaissance Technologies had $8.4 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also initiated a $5.7 million position during the quarter. The other funds with brand new INSP positions are Guy Levy’s Soleus Capital, Mark Coe’s Intrinsic Edge Capital, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks similar to Inspire Medical Systems, Inc. (NYSE:INSP). We will take a look at Flowserve Corporation (NYSE:FLS), Allegro MicroSystems, Inc. (NASDAQ:ALGM), 51job, Inc. (NASDAQ:JOBS), Virtu Financial Inc (NASDAQ:VIRT), nVent Electric plc (NYSE:NVT), JOYY Inc. (NASDAQ:YY), and Hexcel Corporation (NYSE:HXL). This group of stocks’ market values resemble INSP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $544 million in INSP’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand Allegro MicroSystems, Inc. (NASDAQ:ALGM) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Inspire Medical Systems, Inc. (NYSE:INSP) is more popular among hedge funds. Our overall hedge fund sentiment score for INSP is 89. 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on INSP as the stock returned 26.9% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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