Should You Add ResMed Inc. (RMD) to Your Portfolio?

Like everyone else, successful investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show successful investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what successful funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at ResMed Inc. (NYSE:RMD) from the perspective of those successful funds.

ResMed Inc. (NYSE:RMD) saw an increase in hedge fund sentiment last quarter. Overall, the number of funds tracked by Insider Monkey bullish on the company went up to 17 from 15 between July and September. At the end of this article we will also compare RMD to other stocks including Shaw Communications Inc (USA) (NYSE:SJR), Cheniere Energy, Inc. (NYSEAMEX:LNG), and Stericycle Inc (NASDAQ:SRCL) to get a better sense of its popularity.

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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With all of this in mind, let’s view the latest action regarding ResMed Inc. (NYSE:RMD).

Hedge fund activity in ResMed Inc. (NYSE:RMD)

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on ResMed, which represents a change of 13% from the end of the second quarter. By comparison, 18 hedge funds held shares or bullish call options in RMD heading into 2016. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jim Simons’ Renaissance Technologies has the most valuable position in ResMed Inc. (NYSE:RMD), worth close to $92.1 million, comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is Cliff Asness’ AQR Capital Management, which holds a $32.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Joel Greenblatt’s Gotham Asset Management and David Harding’s Winton Capital Management. We should note that none of these hedge funds are 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.

As one would reasonably expect, key hedge funds have been driving this bullishness. Israel Englander’s Millennium Management assembled the biggest position in ResMed Inc. (NYSE:RMD). Millennium Management had $11.6 million invested in the company at the end of the quarter. George Hall’s Clinton Group also made a $6.1 million investment in the stock during the quarter. The following funds were also among the new RMD investors: Alec Litowitz and Ross Laser’s Magnetar Capital, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ResMed Inc. (NYSE:RMD) but similarly valued. We will take a look at Shaw Communications Inc (USA) (NYSE:SJR), Cheniere Energy, Inc. (NYSEAMEX:LNG), Stericycle Inc (NASDAQ:SRCL), and Advanced Semiconductor Engineering (ADR) (NYSE:ASX). This group of stocks’ market caps match RMD’s market cap.

As you can see these stocks had an average of 24 investors with bullish positions and the average amount invested in these stocks was $1.38 billion. That figure was just $205 million in RMD’s case. Cheniere Energy, Inc. (NYSEAMEX:LNG) is the most popular stock in this table. On the other hand Shaw Communications Inc (USA) (NYSE:SJR) is the least popular one with only nine investors holding shares. ResMed Inc. (NYSE:RMD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Cheniere Energy, Inc. (NYSEAMEX:LNG) might be a better candidate to consider taking a long position in.