Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Tandem Diabetes Care Inc (NASDAQ:TNDM).
Hedge fund interest in Tandem Diabetes Care Inc (NASDAQ:TNDM) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Umpqua Holdings Corporation (NASDAQ:UMPQ), LogMeIn Inc (NASDAQ:LOGM), and NorthWestern Corporation (NYSE:NWE) to gather more data points. Our calculations also showed that TNDM isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most market participants, hedge funds are seen as worthless, old investment vehicles of the past. While there are over 8000 funds trading at present, We look at the moguls of this club, about 750 funds. These investment experts control bulk of the hedge fund industry’s total capital, and by following their inimitable stock picks, Insider Monkey has unearthed several investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action surrounding Tandem Diabetes Care Inc (NASDAQ:TNDM).
What does smart money think about Tandem Diabetes Care Inc (NASDAQ:TNDM)?
Heading into the third quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TNDM over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Tandem Diabetes Care Inc (NASDAQ:TNDM) was held by Redmile Group, which reported holding $75.2 million worth of stock at the end of March. It was followed by Millennium Management with a $60.9 million position. Other investors bullish on the company included Renaissance Technologies, Columbus Circle Investors, and OrbiMed Advisors.
Seeing as Tandem Diabetes Care Inc (NASDAQ:TNDM) has witnessed declining sentiment from the smart money, we can see that there lies a certain “tier” of hedge funds who were dropping their full holdings last quarter. Intriguingly, D. E. Shaw’s D E Shaw sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $33 million in stock. Mariko Gordon’s fund, Daruma Asset Management, also cut its stock, about $24 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Tandem Diabetes Care Inc (NASDAQ:TNDM). These stocks are Umpqua Holdings Corporation (NASDAQ:UMPQ), LogMeIn Inc (NASDAQ:LOGM), NorthWestern Corporation (NYSE:NWE), and Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). This group of stocks’ market values resemble TNDM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMPQ | 20 | 212334 | 0 |
| LOGM | 27 | 400281 | 0 |
| NWE | 15 | 188258 | 0 |
| RBA | 12 | 126049 | -3 |
| Average | 18.5 | 231731 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $486 million in TNDM’s case. LogMeIn Inc (NASDAQ:LOGM) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Tandem Diabetes Care Inc (NASDAQ:TNDM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TNDM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TNDM were disappointed as the stock returned -8.6% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
