Is Masimo Corporation (MASI) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Masimo Corporation (NASDAQ:MASI).

Masimo Corporation (NASDAQ:MASI) was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. MASI investors should pay attention to an increase in hedge fund sentiment of late. There were 30 hedge funds in our database with MASI holdings at the end of the previous quarter. Our calculations also showed that MASI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 51 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.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action regarding Masimo Corporation (NASDAQ:MASI).

What have hedge funds been doing with Masimo Corporation (NASDAQ:MASI)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MASI over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Masimo Corporation (NASDAQ:MASI), which was worth $40.4 million at the end of the third quarter. On the second spot was GLG Partners which amassed $19 million worth of shares. GAMCO Investors, Millennium Management, and Royce & Associates 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 Blue Whale Capital allocated the biggest weight to Masimo Corporation (NASDAQ:MASI), around 2.82% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, dishing out 2.73 percent of its 13F equity portfolio to MASI.

Now, key money managers have jumped into Masimo Corporation (NASDAQ:MASI) headfirst. Integral Health Asset Management, managed by Bhagwan Jay Rao, initiated the biggest position in Masimo Corporation (NASDAQ:MASI). Integral Health Asset Management had $6.2 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management, and Brian Ashford-Russell and Tim Woolley’s Polar Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Masimo Corporation (NASDAQ:MASI) but similarly valued. We will take a look at BeiGene, Ltd. (NASDAQ:BGNE), Qiagen NV (NASDAQ:QGEN), NVR, Inc. (NYSE:NVR), and Open Text Corporation (NASDAQ:OTEX). This group of stocks’ market values resemble MASI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $909 million. That figure was $157 million in MASI’s case. NVR, Inc. (NYSE:NVR) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 11 bullish hedge fund positions. Masimo Corporation (NASDAQ:MASI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MASI as the stock returned 35.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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