Is Inspire Medical Systems, Inc. (INSP) A Good Stock To Buy?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Inspire Medical Systems, Inc. (NYSE:INSP).

Is INSP a good stock to buy? Prominent investors were turning less bullish. The number of bullish hedge fund bets went down by 3 recently. Inspire Medical Systems, Inc. (NYSE:INSP) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that INSP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the new hedge fund action regarding Inspire Medical Systems, Inc. (NYSE:INSP).

Joel Greenblatt of Gotham Asset Management

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

At the end of September, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2021. On the other hand, there were a total of 25 hedge funds with a bullish position in INSP a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Inspire Medical Systems, Inc. (NYSE:INSP) was held by Marshall Wace LLP, which reported holding $85.3 million worth of stock at the end of September. It was followed by D E Shaw with a $73.1 million position. Other investors bullish on the company included Pura Vida Investments, Driehaus Capital, and Atika Capital. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Inspire Medical Systems, Inc. (NYSE:INSP), around 3.81% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, designating 1.94 percent of its 13F equity portfolio to INSP.

Seeing as Inspire Medical Systems, Inc. (NYSE:INSP) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $8.4 million in stock, and John Osterweis’s Osterweis Capital Management was right behind this move, as the fund dumped about $5.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Inspire Medical Systems, Inc. (NYSE:INSP). These stocks are CCC Intelligent Solutions Holdings Inc. (NYSE:CCCS), iQIYI, Inc. (NASDAQ:IQ), Kingsoft Cloud Holdings Limited (NASDAQ:KC), HUTCHMED (China) Limited (NASDAQ:HCM), Perrigo Co Plc (NYSE:PRGO), Columbia Sportswear Company (NASDAQ:COLM), and Rapid7 Inc (NASDAQ:RPD). This group of stocks’ market caps resemble INSP’s market cap.

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As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $478 million in INSP’s case. CCC Intelligent Solutions Holdings Inc. (NYSE:CCCS) is the most popular stock in this table. On the other hand HUTCHMED (China) Limited (NASDAQ:HCM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Inspire Medical Systems, Inc. (NYSE:INSP) is more popular among hedge funds. Our overall hedge fund sentiment score for INSP is 79.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately INSP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INSP were disappointed as the stock returned -4.1% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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