Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Insulet Corporation (NASDAQ:PODD).
Is Insulet Corporation (NASDAQ:PODD) a first-rate stock to buy now? The best stock pickers are becoming more confident. The number of long hedge fund positions rose by 13 recently. Our calculations also showed that PODD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PODD was in 37 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with PODD holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Philippe Laffont of Coatue Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action regarding Insulet Corporation (NASDAQ:PODD).
What have hedge funds been doing with Insulet Corporation (NASDAQ:PODD)?
Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 54% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PODD over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Coatue Management held the most valuable stake in Insulet Corporation (NASDAQ:PODD), which was worth $116.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $89.5 million worth of shares. Millennium Management, Rock Springs Capital Management, and Columbus Circle Investors 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 Think Investments allocated the biggest weight to Insulet Corporation (NASDAQ:PODD), around 11.19% of its portfolio. Consonance Capital Management is also relatively very bullish on the stock, designating 2.54 percent of its 13F equity portfolio to PODD.
Consequently, specific money managers have jumped into Insulet Corporation (NASDAQ:PODD) headfirst. Coatue Management, managed by Philippe Laffont, initiated the largest position in Insulet Corporation (NASDAQ:PODD). Coatue Management had $116.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $44.5 million investment in the stock during the quarter. The other funds with brand new PODD positions are Mitchell Blutt’s Consonance Capital Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Insulet Corporation (NASDAQ:PODD) but similarly valued. These stocks are Altaba Inc. (NASDAQ:AABA), Eastman Chemical Company (NYSE:EMN), Domino’s Pizza, Inc. (NYSE:DPZ), and Weibo Corp (NASDAQ:WB). This group of stocks’ market caps are closest to PODD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AABA | 48 | 4699502 | -11 |
| EMN | 27 | 409073 | 4 |
| DPZ | 36 | 1932455 | 9 |
| WB | 14 | 353314 | -2 |
| Average | 31.25 | 1848586 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1849 million. That figure was $500 million in PODD’s case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 14 bullish hedge fund positions. Insulet Corporation (NASDAQ:PODD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PODD as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
