Is INSM Stock A Buy or Sell?

In this article we are going to use hedge fund sentiment as a tool and determine whether Insmed Incorporated (NASDAQ:INSM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is INSM stock a buy? Hedge fund interest in Insmed Incorporated (NASDAQ:INSM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that INSM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare INSM to other stocks including GW Pharmaceuticals plc (NASDAQ:GWPH), Glaukos Corporation (NYSE:GKOS), and FibroGen Inc (NASDAQ:FGEN) to get a better sense of its popularity.

Felix Baker of Baker Bros.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s analyze the latest hedge fund action surrounding Insmed Incorporated (NASDAQ:INSM).

Do Hedge Funds Think INSM Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INSM over the last 22 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Palo Alto Investors held the most valuable stake in Insmed Incorporated (NASDAQ:INSM), which was worth $203.3 million at the end of the fourth quarter. On the second spot was Baker Bros. Advisors which amassed $71.8 million worth of shares. Deerfield Management, Citadel Investment Group, 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 Palo Alto Investors allocated the biggest weight to Insmed Incorporated (NASDAQ:INSM), around 10.66% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, designating 3.92 percent of its 13F equity portfolio to INSM.

Judging by the fact that Insmed Incorporated (NASDAQ:INSM) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who were dropping their positions entirely in the fourth quarter. It’s worth mentioning that David Rosen’s Rubric Capital Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $35.4 million in stock, and Xiuping Li’s Opti Capital Management was right behind this move, as the fund said goodbye to about $4.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Insmed Incorporated (NASDAQ:INSM). These stocks are GW Pharmaceuticals plc (NASDAQ:GWPH), Glaukos Corporation (NYSE:GKOS), FibroGen Inc (NASDAQ:FGEN), SelectQuote, Inc. (NYSE:SLQT), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), PotlatchDeltic Corporation (NASDAQ:PCH), and Telos Corporation (NASDAQ:TLS). This group of stocks’ market caps are closest to INSM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $560 million in INSM’s case. Telos Corporation (NASDAQ:TLS) is the most popular stock in this table. On the other hand Glaukos Corporation (NYSE:GKOS) is the least popular one with only 13 bullish hedge fund positions. Insmed Incorporated (NASDAQ:INSM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INSM is 81.3. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately INSM wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on INSM were disappointed as the stock returned -3.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.