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DexCom, Inc. (DXCM): Are Hedge Funds Right About This Stock?

·5 min read

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 866 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 March 31st. In this article we look at what those investors think of DexCom, Inc. (NASDAQ:DXCM).

Is DexCom, Inc. (NASDAQ:DXCM) ready to rally soon? Prominent investors were in an optimistic mood. The number of long hedge fund positions improved by 4 lately. DexCom, Inc. (NASDAQ:DXCM) was in 56 hedge funds' portfolios at the end of March. The all time high for this statistic is 58. Our calculations also showed that DXCM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Arthur B Cohen and Joseph Healey of Healthcor Management LP

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Now let's take a look at the latest hedge fund action surrounding DexCom, Inc. (NASDAQ:DXCM).

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

At the end of the first quarter, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DXCM over the last 23 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Lone Pine Capital held the most valuable stake in DexCom, Inc. (NASDAQ:DXCM), which was worth $852.9 million at the end of the fourth quarter. On the second spot was Holocene Advisors which amassed $136.7 million worth of shares. OrbiMed Advisors, Citadel Investment Group, and Redmile Group 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 Engine No. 1 LLC allocated the biggest weight to DexCom, Inc. (NASDAQ:DXCM), around 4.25% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 3.15 percent of its 13F equity portfolio to DXCM.

As industrywide interest jumped, some big names were breaking ground themselves. Redmile Group, managed by Jeremy Green, assembled the most outsized position in DexCom, Inc. (NASDAQ:DXCM). Redmile Group had $79.9 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey's Healthcor Management LP also initiated a $51.1 million position during the quarter. The other funds with brand new DXCM positions are Christopher James's Partner Fund Management, Louis Bacon's Moore Global Investments, and Christopher James's Partner Fund Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as DexCom, Inc. (NASDAQ:DXCM) but similarly valued. These stocks are Corteva, Inc. (NYSE:CTVA), Pioneer Natural Resources Company (NYSE:PXD), Tencent Music Entertainment Group (NYSE:TME), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Hilton Worldwide Holdings Inc (NYSE:HLT), Corning Incorporated (NYSE:GLW), and Zimmer Biomet Holdings Inc (NYSE:ZBH). All of these stocks' market caps resemble DXCM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTVA,35,1503114,-3 PXD,37,623143,-3 TME,63,1771488,37 ALXN,77,6915184,0 HLT,47,5139343,-13 GLW,32,507110,-7 ZBH,50,2151143,-3 Average,48.7,2658646,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.7 hedge funds with bullish positions and the average amount invested in these stocks was $2659 million. That figure was $1678 million in DXCM's case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Corning Incorporated (NYSE:GLW) is the least popular one with only 32 bullish hedge fund positions. DexCom, Inc. (NASDAQ:DXCM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DXCM is 64.6. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on DXCM as the stock returned 11.4% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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