Is Insulet Corporation (PODD) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Insulet Corporation (NASDAQ:PODD) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Luxoft Holding Inc (NYSE:LXFT), Cosan Limited (USA) (NYSE:CZZ), and Pattern Energy Group Inc (NASDAQ:PEGI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Insulet Corporation (NASDAQ:PODD)

Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, same as in one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in PODD heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Slate Path Capital, led by David Greenspan, holds the largest position in Insulet Corporation (NASDAQ:PODD). Slate Path Capital has a $111.4 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund manager is David Gallo of Valinor Management LLC, with a $88.3 million position; the fund has 3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise D. E. Shaw’s D E Shaw, Shashin Shah’s Think Investments and Matthew A. Weatherbie’s Weatherbie Capital. We should note that Think Investments is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Insulet Corporation (NASDAQ:PODD) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that elected to cut their entire stakes heading into Q4. Intriguingly, Yen Liow’s Aravt Global dropped the largest position of all the investors followed by Insider Monkey, valued at an estimated $18 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $1 million worth of shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Insulet Corporation (NASDAQ:PODD) but similarly valued. We will take a look at Luxoft Holding Inc (NYSE:LXFT), Cosan Limited (USA) (NYSE:CZZ), Pattern Energy Group Inc (NASDAQ:PEGI), and International Bancshares Corp (NASDAQ:IBOC). This group of stocks’ market values match PODD’s market value.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $367 million in PODD’s case. Cosan Limited (USA) (NYSE:CZZ) is the most popular stock in this table. On the other hand International Bancshares Corp (NASDAQ:IBOC) is the least popular one with only 10 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CZZ might be a better candidate to consider taking a long position in.

Disclosure: None