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Hedge Funds Have Never Been This Bullish On Masimo Corporation (MASI)

Abigail Fisher

How do we determine whether Masimo Corporation (NASDAQ:MASI) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Masimo Corporation (NASDAQ:MASI) the right investment to pursue these days? The best stock pickers are turning bullish. The number of bullish hedge fund bets rose by 1 in recent months. Our calculations also showed that MASI isn't among the 30 most popular stocks among hedge funds. MASI was in 34 hedge funds' portfolios at the end of the first quarter of 2019. There were 33 hedge funds in our database with MASI positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let's check out the latest hedge fund action regarding Masimo Corporation (NASDAQ:MASI).

What have hedge funds been doing with Masimo Corporation (NASDAQ:MASI)?

Heading into the second quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MASI over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MASI_june2019

Of the funds tracked by Insider Monkey, Cliff Asness's AQR Capital Management has the number one position in Masimo Corporation (NASDAQ:MASI), worth close to $114.1 million, corresponding to 0.1% of its total 13F portfolio. On AQR Capital Management's heels is Citadel Investment Group, managed by Ken Griffin, which holds a $68.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Jim Simons's Renaissance Technologies, John Overdeck and David Siegel's Two Sigma Advisors and Paul Marshall and Ian Wace's Marshall Wace LLP.

As industrywide interest jumped, specific money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Masimo Corporation (NASDAQ:MASI). Arrowstreet Capital had $23.9 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider's SG Capital Management also made a $15.2 million investment in the stock during the quarter. The other funds with brand new MASI positions are Benjamin A. Smith's Laurion Capital Management, Bruce Kovner's Caxton Associates LP, and Ronald Hua's Qtron Investments.

Let's go over hedge fund activity in other stocks similar to Masimo Corporation (NASDAQ:MASI). We will take a look at CDK Global Inc (NASDAQ:CDK), Service Corporation International (NYSE:SCI), Xerox Corporation (NYSE:XRX), and Ares Capital Corporation (NASDAQ:ARCC). This group of stocks' market values resemble MASI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDK,23,548582,-2 SCI,20,527994,3 XRX,33,1378808,-11 ARCC,22,261488,-4 Average,24.5,679218,-3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $679 million. That figure was $485 million in MASI's case. Xerox Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Masimo Corporation (NASDAQ:MASI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MASI, though not to the same extent, as the stock returned -0.2% during the same period and outperformed the market as well.

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

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