Where Do Hedge Funds Stand On Insmed Incorporated (INSM)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Insmed Incorporated (NASDAQ:INSM).

Hedge fund interest in Insmed Incorporated (NASDAQ:INSM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that INSM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Vishay Intertechnology, Inc. (NYSE:VSH), and PROG Holdings Inc (NYSE:PRG) to gather more data points.

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Aaron Cowen of Suvretta Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind let’s check out the fresh hedge fund action surrounding Insmed Incorporated (NASDAQ:INSM).

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

At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in INSM over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Palo Alto Investors,  holds the number one position in Insmed Incorporated (NASDAQ:INSM). Palo Alto Investors has a $171.3 million position in the stock, comprising 9.4% of its 13F portfolio. The second most bullish fund manager is Point72 Asset Management, managed by Steve Cohen, which holds a $81.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Brandon Haley’s Holocene Advisors, Julian Baker and Felix Baker’s Baker Bros. Advisors and Robert Pohly’s Samlyn Capital. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Insmed Incorporated (NASDAQ:INSM), around 9.44% of its 13F portfolio. SilverArc Capital is also relatively very bullish on the stock, designating 2.25 percent of its 13F equity portfolio to INSM.

Since Insmed Incorporated (NASDAQ:INSM) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $19.8 million in stock, and Josh Donfeld and David Rogers’s Castle Hook Partners was right behind this move, as the fund said goodbye to about $7.4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Insmed Incorporated (NASDAQ:INSM) but similarly valued. We will take a look at Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Vishay Intertechnology, Inc. (NYSE:VSH), PROG Holdings Inc (NYSE:PRG), Casella Waste Systems Inc. (NASDAQ:CWST), Ingevity Corporation (NYSE:NGVT), Prospect Capital Corporation (NASDAQ:PSEC), and Kontoor Brands, Inc. (NYSE:KTB). This group of stocks’ market valuations resemble INSM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $568 million in INSM’s case. PROG Holdings Inc (NYSE:PRG) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 11 bullish hedge fund positions. Insmed Incorporated (NASDAQ:INSM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INSM is 46.8. 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 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately INSM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); INSM investors were disappointed as the stock returned -3.5% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.

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