The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Tandem Diabetes Care Inc (NASDAQ:TNDM) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Tandem Diabetes Care Inc (NASDAQ:TNDM) the right investment to pursue these days? Investors who are in the know were becoming more confident. The number of long hedge fund bets moved up by 4 recently. Tandem Diabetes Care Inc (NASDAQ:TNDM) was in 32 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. Our calculations also showed that TNDM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Richard Driehaus of Driehaus Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to take a gander at the key hedge fund action surrounding Tandem Diabetes Care Inc (NASDAQ:TNDM).
Hedge fund activity in Tandem Diabetes Care Inc (NASDAQ:TNDM)
At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the first quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in TNDM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Tandem Diabetes Care Inc (NASDAQ:TNDM), with a stake worth $82.6 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $75.4 million. Columbus Circle Investors, Driehaus Capital, and Citadel Investment 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 Columbus Circle Investors allocated the biggest weight to Tandem Diabetes Care Inc (NASDAQ:TNDM), around 2.63% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 1.79 percent of its 13F equity portfolio to TNDM.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in Tandem Diabetes Care Inc (NASDAQ:TNDM). Millennium Management had $75.4 million invested in the company at the end of the quarter. Peter S. Park's Park West Asset Management also initiated a $14.8 million position during the quarter. The following funds were also among the new TNDM investors: Donald Sussman's Paloma Partners, Peter Muller's PDT Partners, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's now review 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 Allogene Therapeutics, Inc. (NASDAQ:ALLO), Globant SA (NYSE:GLOB), Huaneng Power International Inc (NYSE:HNP), AMERCO (NASDAQ:UHAL), B2Gold Corp (NYSE:BTG), GFL Environmental Inc. (NYSE:GFL), and Floor & Decor Holdings, Inc. (NYSE:FND). All of these stocks' market caps are similar to TNDM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALLO,24,329892,12 GLOB,17,235992,0 HNP,2,2391,-1 UHAL,20,327924,5 BTG,18,500334,-1 GFL,16,207198,6 FND,44,817503,21 Average,20.1,345891,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $402 million in TNDM's case. Floor & Decor Holdings, Inc. (NYSE:FND) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 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 69.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately TNDM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on TNDM were disappointed as the stock returned 8.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.