In this article we will check out the progression of hedge fund sentiment towards Inspire Medical Systems, Inc. (NYSE:INSP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Inspire Medical Systems, Inc. (NYSE:INSP) shareholders have witnessed an increase in hedge fund sentiment recently. Inspire Medical Systems, Inc. (NYSE:INSP) was in 28 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 27. 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 Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Inspire Medical Systems, Inc. (NYSE:INSP).
Do Hedge Funds Think INSP Is A Good Stock To Buy Now?
At the end of March, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in INSP over the last 23 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Inspire Medical Systems, Inc. (NYSE:INSP), with a stake worth $81.8 million reported as of the end of March. Trailing D E Shaw was Marshall Wace LLP, which amassed a stake valued at $66.9 million. Driehaus Capital, Pura Vida Investments, and Atika Capital 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 Miura Global Management allocated the biggest weight to Inspire Medical Systems, Inc. (NYSE:INSP), around 3.51% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, designating 2.66 percent of its 13F equity portfolio to INSP.
Consequently, key hedge funds were leading the bulls’ herd. Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, initiated the biggest position in Inspire Medical Systems, Inc. (NYSE:INSP). Sectoral Asset Management had $12.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Anand Parekh’s Alyeska Investment Group.
Let’s go over hedge fund activity in other stocks similar to Inspire Medical Systems, Inc. (NYSE:INSP). We will take a look at Amkor Technology, Inc. (NASDAQ:AMKR), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Healthequity Inc (NASDAQ:HQY), TFS Financial Corporation (NASDAQ:TFSL), Lemonade, Inc. (NYSE:LMND), SunPower Corporation (NASDAQ:SPWR), and Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). All of these stocks’ market caps resemble INSP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMKR | 20 | 172121 | -4 |
| OCFT | 10 | 70885 | 5 |
| HQY | 18 | 221317 | -2 |
| TFSL | 6 | 145686 | -4 |
| LMND | 16 | 159616 | 3 |
| SPWR | 18 | 182419 | -6 |
| OLLI | 24 | 194324 | 3 |
| Average | 16 | 163767 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $431 million in INSP’s case. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 6 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 86. 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 gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately INSP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INSP were disappointed as the stock returned -10.3% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
