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Hedge Funds Are Crazy About ResMed Inc. (RMD)

Nina Todic

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not ResMed Inc. (NYSE:RMD) makes for a good investment right now.

ResMed Inc. (NYSE:RMD) investors should pay attention to an increase in hedge fund sentiment of late. Our calculations also showed that RMD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

To the average investor there are a lot of methods stock market investors can use to size up their holdings. A couple of the most useful methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a healthy margin (see the details here).

[caption id="attachment_189632" align="aligncenter" width="450"] David Harding of Winton Capital Management[/caption]

David Harding

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's review the latest hedge fund action surrounding ResMed Inc. (NYSE:RMD).

How are hedge funds trading ResMed Inc. (NYSE:RMD)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the second quarter of 2019. On the other hand, there were a total of 24 hedge funds with a bullish position in RMD a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in ResMed Inc. (NYSE:RMD) was held by AQR Capital Management, which reported holding $54.4 million worth of stock at the end of September. It was followed by Adage Capital Management with a $23.6 million position. Other investors bullish on the company included GLG Partners, Winton Capital Management, and PDT Partners. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to ResMed Inc. (NYSE:RMD), around 0.6% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to RMD.

Consequently, key hedge funds have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, created the most valuable position in ResMed Inc. (NYSE:RMD). Maverick Capital had $7.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $7.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Donald Sussman's Paloma Partners, and David E. Shaw's D E Shaw.

Let's now take a look at hedge fund activity in other stocks similar to ResMed Inc. (NYSE:RMD). We will take a look at Rockwell Automation Inc. (NYSE:ROK), ORIX Corporation (NYSE:IX), Ameriprise Financial, Inc. (NYSE:AMP), and The Clorox Company (NYSE:CLX). This group of stocks' market valuations are similar to RMD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROK,26,468953,-5 IX,4,7651,-2 AMP,27,1104619,-12 CLX,32,1004826,4 Average,22.25,646512,-3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $647 million. That figure was $136 million in RMD's case. The Clorox Company (NYSE:CLX) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. ResMed Inc. (NYSE:RMD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on RMD as the stock returned 11% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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