“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Tandem Diabetes Care Inc (NASDAQ:TNDM) was in 22 hedge funds’ portfolios at the end of September. TNDM has seen an increase in support from the world’s most elite money managers of late. There were 13 hedge funds in our database with TNDM holdings at the end of the previous quarter. Our calculations also showed that tndm isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the key hedge fund action regarding Tandem Diabetes Care Inc (NASDAQ:TNDM).
How are hedge funds trading Tandem Diabetes Care Inc (NASDAQ:TNDM)?
Heading into the fourth quarter of 2018, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 69% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in TNDM over the last 13 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.
More specifically, Redmile Group was the largest shareholder of Tandem Diabetes Care Inc (NASDAQ:TNDM), with a stake worth $45.8 million reported as of the end of September. Trailing Redmile Group was Two Sigma Advisors, which amassed a stake valued at $38.4 million. Point72 Asset Management, Millennium Management, and OrbiMed Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Redmile Group, managed by Jeremy Green, established the biggest position in Tandem Diabetes Care Inc (NASDAQ:TNDM). Redmile Group had $45.8 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also initiated a $24.4 million position during the quarter. The other funds with brand new TNDM positions are Warren Lammert’s Granite Point Capital, Brad Farber’s Atika Capital, and Efrem Kamen’s Pura Vida Investments.
Let’s now review hedge fund activity in other stocks similar to Tandem Diabetes Care Inc (NASDAQ:TNDM). We will take a look at The Cheesecake Factory Incorporated (NASDAQ:CAKE), Mallinckrodt Public Limited Company (NYSE:MNK), Premier Inc (NASDAQ:PINC), and Regenxbio Inc (NASDAQ:RGNX). This group of stocks’ market valuations resemble TNDM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAKE | 21 | 152122 | 2 |
| MNK | 20 | 490595 | -1 |
| PINC | 21 | 214420 | 3 |
| RGNX | 24 | 418010 | 3 |
| Average | 21.5 | 318787 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $319 million. That figure was $308 million in TNDM’s case. Regenxbio Inc (NASDAQ:RGNX) is the most popular stock in this table. On the other hand Mallinckrodt Public Limited Company (NYSE:MNK) is the least popular one with only 20 bullish hedge fund positions. Tandem Diabetes Care Inc (NASDAQ:TNDM) 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 RGNX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
