Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of ResMed Inc. (NYSE:RMD) based on that data and determine whether they were really smart about the stock.
ResMed Inc. (NYSE:RMD) has experienced a decrease in activity from the world's largest hedge funds in recent months. ResMed Inc. (NYSE:RMD) was in 25 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. Our calculations also showed that RMD 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. 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 website to get excerpts of these letters in your inbox. Now let's view the key hedge fund action regarding ResMed Inc. (NYSE:RMD).
How are hedge funds trading ResMed Inc. (NYSE:RMD)?
At Q2's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in RMD a year ago. 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, Cliff Asness's AQR Capital Management has the most valuable position in ResMed Inc. (NYSE:RMD), worth close to $44 million, comprising 0.1% of its total 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $32.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions encompass Bryan Hinmon's Motley Fool Asset Management, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position One68 Global Capital allocated the biggest weight to ResMed Inc. (NYSE:RMD), around 32.21% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, dishing out 2.6 percent of its 13F equity portfolio to RMD.
Judging by the fact that ResMed Inc. (NYSE:RMD) has experienced declining sentiment from the smart money, it's safe to say that there is a sect of funds who were dropping their positions entirely in the second quarter. Intriguingly, Ernest Chow and Jonathan Howe's Sensato Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $9.8 million in stock, and Michael Rockefeller and KarláKroeker's Woodline Partners was right behind this move, as the fund sold off about $6.8 million worth. These moves are interesting, as total hedge fund interest dropped by 8 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as ResMed Inc. (NYSE:RMD) but similarly valued. These stocks are SYSCO Corporation (NYSE:SYY), Cintas Corporation (NASDAQ:CTAS), WEC Energy Group, Inc. (NYSE:WEC), The Clorox Company (NYSE:CLX), Verisk Analytics, Inc. (NASDAQ:VRSK), IAC/InterActiveCorp (NASDAQ:IAC), and Agilent Technologies Inc. (NYSE:A). This group of stocks' market caps are closest to RMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYY,42,2177488,7 CTAS,34,531899,-8 WEC,30,290696,1 CLX,36,1488687,-5 VRSK,36,981827,5 IAC,60,4955863,3 A,38,2815048,3 Average,39.4,1891644,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $1892 million. That figure was $224 million in RMD's case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand WEC Energy Group, Inc. (NYSE:WEC) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks ResMed Inc. (NYSE:RMD) is even less popular than WEC. Our overall hedge fund sentiment score for RMD is 11.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards RMD. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th but managed to beat the market by 17.7 percentage points. Unfortunately RMD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); RMD investors were disappointed as the stock returned -11.8% since the end of Q2 (through 9/25) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.