Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Masimo Corporation (NASDAQ:MASI).
Masimo Corporation (NASDAQ:MASI) shareholders have witnessed a decrease in hedge fund sentiment lately. Masimo Corporation (NASDAQ:MASI) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. Our calculations also showed that MASI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Louis Navellier of Navellier & Associates
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 fresh hedge fund action encompassing Masimo Corporation (NASDAQ:MASI).
Do Hedge Funds Think MASI Is A Good Stock To Buy Now?
At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MASI over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Masimo Corporation (NASDAQ:MASI) was held by Fundsmith LLP, which reported holding $105.1 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $41.8 million position. Other investors bullish on the company included Blue Whale Capital, Montanaro Asset Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Blue Whale Capital allocated the biggest weight to Masimo Corporation (NASDAQ:MASI), around 4.18% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, earmarking 3.15 percent of its 13F equity portfolio to MASI.
Because Masimo Corporation (NASDAQ:MASI) has experienced bearish sentiment from the smart money, it’s safe to say that there was a specific group of funds who sold off their entire stakes last quarter. Interestingly, Chuck Royce’s Royce & Associates sold off the biggest position of all the hedgies followed by Insider Monkey, valued at close to $4.6 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $2.7 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 7 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Masimo Corporation (NASDAQ:MASI) but similarly valued. These stocks are CBOE Global Markets Inc (NASDAQ:CBOE), Lennox International Inc. (NYSE:LII), W.R. Berkley Corporation (NYSE:WRB), Vedanta Ltd (NYSE:VEDL), Equitable Holdings, Inc. (NYSE:EQH), Hasbro, Inc. (NASDAQ:HAS), and Camden Property Trust (NYSE:CPT). All of these stocks’ market caps are similar to MASI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBOE | 31 | 826143 | -2 |
| LII | 26 | 465734 | 1 |
| WRB | 36 | 648828 | 4 |
| VEDL | 10 | 63949 | 0 |
| EQH | 45 | 1750676 | 1 |
| HAS | 27 | 211638 | -4 |
| CPT | 21 | 440978 | -3 |
| Average | 28 | 629707 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $630 million. That figure was $317 million in MASI’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 10 bullish hedge fund positions. Masimo Corporation (NASDAQ:MASI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MASI is 47.7. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on MASI as the stock returned 18% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.
Follow Masimo Corp (NASDAQ:MASI)
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Disclosure: None. This article was originally published at Insider Monkey.
