Were Expert Investors Right About Tandem Diabetes Care Inc (TNDM)?

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 867 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 September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Tandem Diabetes Care Inc (NASDAQ:TNDM) and determine whether the smart money was really smart about this stock.

Tandem Diabetes Care Inc (NASDAQ:TNDM) has experienced a decrease in hedge fund interest in recent months. Tandem Diabetes Care Inc (NASDAQ:TNDM) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 39. There were 32 hedge funds in our database with TNDM holdings at the end of June. Our calculations also showed that TNDM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Tandem Diabetes Care Inc (NASDAQ:TNDM).

Mark Kingdon of Kingdon Capital

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

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the second quarter of 2021. On the other hand, there were a total of 30 hedge funds with a bullish position in TNDM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Consonance Capital Management, managed by Mitchell Blutt, holds the number one position in Tandem Diabetes Care Inc (NASDAQ:TNDM). Consonance Capital Management has a $58.2 million position in the stock, comprising 31.8% of its 13F portfolio. Coming in second is Point72 Asset Management, managed by Steve Cohen, which holds a $42.6 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism contain Noam Gottesman’s GLG Partners, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Tandem Diabetes Care Inc (NASDAQ:TNDM), around 31.84% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to TNDM.

Due to the fact that Tandem Diabetes Care Inc (NASDAQ:TNDM) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Chuck Royce’s Royce & Associates sold off the largest investment of all the hedgies watched by Insider Monkey, comprising about $7.6 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dropped about $3.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tandem Diabetes Care Inc (NASDAQ:TNDM) but similarly valued. These stocks are Endeavor Group Holdings, Inc. (NYSE:EDR), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), Autoliv Inc. (NYSE:ALV), YETI Holdings, Inc. (NYSE:YETI), BRP Inc. (NASDAQ:DOOO), People’s United Financial, Inc. (NASDAQ:PBCT), and Encompass Health Corporation (NYSE:EHC). This group of stocks’ market valuations are similar to TNDM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $875 million. That figure was $287 million in TNDM’s case. Encompass Health Corporation (NYSE:EHC) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 16 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. Our overall hedge fund sentiment score for TNDM is 54.6. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, TNDM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TNDM were disappointed as the stock returned -1.1% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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