Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Intuitive Surgical, Inc. (NASDAQ:ISRG) in this article.
Intuitive Surgical, Inc. (NASDAQ:ISRG) has experienced an increase in activity from the world’s largest hedge funds recently. ISRG was in 51 hedge funds’ portfolios at the end of December. There were 45 hedge funds in our database with ISRG positions at the end of the previous quarter. Our calculations also showed that ISRG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 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 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
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to check out the new hedge fund action surrounding Intuitive Surgical, Inc. (NASDAQ:ISRG).
Hedge fund activity in Intuitive Surgical, Inc. (NASDAQ:ISRG)
Heading into the first quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 49 hedge funds with a bullish position in ISRG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Intuitive Surgical, Inc. (NASDAQ:ISRG) was held by Coatue Management, which reported holding $167.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $159.7 million position. Other investors bullish on the company included OrbiMed Advisors, GQG Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 3.23% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 2.85 percent of its 13F equity portfolio to ISRG.
Now, key hedge funds have jumped into Intuitive Surgical, Inc. (NASDAQ:ISRG) headfirst. Renaissance Technologies, initiated the largest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Renaissance Technologies had $70.8 million invested in the company at the end of the quarter. Kevin Molloy’s Iron Triangle Partners also made a $10.2 million investment in the stock during the quarter. The other funds with brand new ISRG positions are Peter Muller’s PDT Partners, Greg Martinez’s Parkman Healthcare Partners, and David Harding’s Winton Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Intuitive Surgical, Inc. (NASDAQ:ISRG) but similarly valued. These stocks are Intuit Inc. (NASDAQ:INTU), Vale SA (NYSE:VALE), The Blackstone Group L.P. (NYSE:BX), and T-Mobile US, Inc. (NYSE:TMUS). This group of stocks’ market caps are similar to ISRG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INTU | 54 | 1701224 | -1 |
| VALE | 26 | 1762450 | -3 |
| BX | 47 | 1192894 | 5 |
| TMUS | 61 | 1396533 | -3 |
| Average | 47 | 1513275 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $1513 million. That figure was $1118 million in ISRG’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 26 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on ISRG, though not to the same extent, as the stock returned -13.6% during the first two months of 2020 (through March 9th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
