We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Inspire Medical Systems, Inc. (NYSE:INSP).
Is Inspire Medical Systems, Inc. (NYSE:INSP) worth your attention right now? The smart money is taking an optimistic view. The number of bullish hedge fund bets improved by 2 recently. Our calculations also showed that INSP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). INSP was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with INSP positions at the end of the previous 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the new hedge fund action regarding Inspire Medical Systems, Inc. (NYSE:INSP).
What does smart money think about Inspire Medical Systems, Inc. (NYSE:INSP)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INSP over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, OrbiMed Advisors was the largest shareholder of Inspire Medical Systems, Inc. (NYSE:INSP), with a stake worth $100 million reported as of the end of September. Trailing OrbiMed Advisors was Columbus Circle Investors, which amassed a stake valued at $52.2 million. Driehaus Capital, Pura Vida Investments, and D E Shaw 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 Pura Vida Investments allocated the biggest weight to Inspire Medical Systems, Inc. (NYSE:INSP), around 6.88% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, setting aside 3.8 percent of its 13F equity portfolio to INSP.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Inspire Medical Systems, Inc. (NYSE:INSP). Adage Capital Management had $9.3 million invested in the company at the end of the quarter. Joel Ramin’s 12 West Capital Management also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Martinez’s Parkman Healthcare Partners, Guy Levy’s Soleus Capital, and Jinghua Yan’s TwinBeech Capital.
Let’s also examine hedge fund activity in other stocks similar to Inspire Medical Systems, Inc. (NYSE:INSP). These stocks are Winnebago Industries, Inc. (NYSE:WGO), Sogou Inc. (NYSE:SOGO), LTC Properties Inc (NYSE:LTC), and Cavco Industries, Inc. (NASDAQ:CVCO). 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 |
|---|---|---|---|
| WGO | 23 | 230640 | 8 |
| SOGO | 11 | 13397 | 7 |
| LTC | 10 | 36725 | 0 |
| CVCO | 20 | 170519 | -1 |
| Average | 16 | 112820 | 3.5 |
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 $113 million. That figure was $325 million in INSP’s case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand LTC Properties Inc (NYSE:LTC) is the least popular one with only 10 bullish hedge fund positions. Inspire Medical Systems, Inc. (NYSE:INSP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately INSP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on INSP were disappointed as the stock returned -26% during the same time period 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 so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
