Is PODD Stock A Buy or Sell?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Insulet Corporation (NASDAQ:PODD).

Is PODD stock a buy or sell? Insulet Corporation (NASDAQ:PODD) was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 44. PODD has seen an increase in support from the world’s most elite money managers lately. There were 38 hedge funds in our database with PODD holdings at the end of September. Our calculations also showed that PODD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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 we’re going to review the new hedge fund action encompassing Insulet Corporation (NASDAQ:PODD).

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

Heading into the first quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PODD over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Coatue Management was the largest shareholder of Insulet Corporation (NASDAQ:PODD), with a stake worth $448.4 million reported as of the end of December. Trailing Coatue Management was Viking Global, which amassed a stake valued at $123.6 million. Citadel Investment Group, Fisher Asset Management, and Rock Springs Capital Management 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 Think Investments allocated the biggest weight to Insulet Corporation (NASDAQ:PODD), around 7.1% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, earmarking 2.53 percent of its 13F equity portfolio to PODD.

As one would reasonably expect, key money managers have jumped into Insulet Corporation (NASDAQ:PODD) headfirst. Deerfield Management, managed by James E. Flynn, assembled the biggest position in Insulet Corporation (NASDAQ:PODD). Deerfield Management had $76.4 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $19.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jeffrey Jay and David Kroin’s Great Point Partners, and Brad Farber’s Atika Capital.

Let’s also examine hedge fund activity in other stocks similar to Insulet Corporation (NASDAQ:PODD). These stocks are Western Digital Corporation (NASDAQ:WDC), IAC/InterActiveCorp (NASDAQ:IAC), Royal Caribbean Group (NYSE:RCL), United Rentals, Inc. (NYSE:URI), Halliburton Company (NYSE:HAL), Trimble Inc. (NASDAQ:TRMB), and Zendesk Inc (NYSE:ZEN). All of these stocks’ market caps are similar to PODD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $1337 million. That figure was $1418 million in PODD’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Trimble Inc. (NASDAQ:TRMB) is the least popular one with only 21 bullish hedge fund positions. Insulet Corporation (NASDAQ:PODD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PODD is 57.7. 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 negative signal and 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 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately PODD wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PODD investors were disappointed as the stock returned 2.1% since the end of December (through 3/19) 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 most of these stocks already outperformed the market in 2020.

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