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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards INMODE LTD. (NASDAQ:INMD) at the end of the first quarter and determine whether the smart money was really smart about this stock.
INMODE LTD. (NASDAQ:INMD) investors should be aware of an increase in hedge fund sentiment lately. INMD was in 11 hedge funds' portfolios at the end of March. There were 7 hedge funds in our database with INMD holdings at the end of the previous quarter. Our calculations also showed that INMD isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the eyes of most market participants, hedge funds are seen as underperforming, old financial tools of the past. While there are more than 8000 funds in operation today, Our experts hone in on the bigwigs of this group, around 850 funds. These investment experts oversee bulk of the smart money's total asset base, and by paying attention to their finest picks, Insider Monkey has unearthed numerous investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Anna Nikolayevsky of Axel Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the key hedge fund action surrounding INMODE LTD. (NASDAQ:INMD).
How are hedge funds trading INMODE LTD. (NASDAQ:INMD)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INMD over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, D1 Capital Partners held the most valuable stake in INMODE LTD. (NASDAQ:INMD), which was worth $20.9 million at the end of the third quarter. On the second spot was Miura Global Management which amassed $19.6 million worth of shares. Millennium Management, Nantahala Capital Management, and LMR Partners 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 Miura Global Management allocated the biggest weight to INMODE LTD. (NASDAQ:INMD), around 5.07% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, setting aside 2.39 percent of its 13F equity portfolio to INMD.
Consequently, key money managers have jumped into INMODE LTD. (NASDAQ:INMD) headfirst. D1 Capital Partners, managed by Daniel Sundheim, initiated the most valuable position in INMODE LTD. (NASDAQ:INMD). D1 Capital Partners had $20.9 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management also made a $5.7 million investment in the stock during the quarter. The other funds with brand new INMD positions are Renaissance Technologies, Anna Nikolayevsky's Axel Capital Management, and Chuck Royce's Royce & Associates.
Let's now take a look at hedge fund activity in other stocks similar to INMODE LTD. (NASDAQ:INMD). These stocks are Homology Medicines, Inc. (NASDAQ:FIXX), MFA Financial, Inc. (NYSE:MFA), Ovintiv Inc. (NYSE:OVV), and Cytokinetics, Inc. (NASDAQ:CYTK). This group of stocks' market values are similar to INMD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIXX,15,102298,6 MFA,16,25866,-3 OVV,19,27099,-4 CYTK,22,206499,2 Average,18,90441,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $60 million in INMD's case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand Homology Medicines, Inc. (NASDAQ:FIXX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks INMODE LTD. (NASDAQ:INMD) is even less popular than FIXX. Hedge funds clearly dropped the ball on INMD as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on INMD as the stock returned 31.7% in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.