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Hedge Funds Have Never Been This Bullish On Tandem Diabetes Care Inc (TNDM)

Nina Todic

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Tandem Diabetes Care Inc (NASDAQ:TNDM).

Tandem Diabetes Care Inc (NASDAQ:TNDM) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that TNDM 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

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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_341400" align="aligncenter" width="600"] Samuel Isaly of OrbiMed Advisors[/caption]

Samuel Isaly Orbimed Advisors

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 take a gander at the new hedge fund action regarding Tandem Diabetes Care Inc (NASDAQ:TNDM).

What have hedge funds been doing with Tandem Diabetes Care Inc (NASDAQ:TNDM)?

Heading into the fourth 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 the second quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in TNDM 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.

No of Hedge Funds with TNDM Positions

Among these funds, Renaissance Technologies held the most valuable stake in Tandem Diabetes Care Inc (NASDAQ:TNDM), which was worth $76.3 million at the end of the third quarter. On the second spot was Redmile Group which amassed $68.4 million worth of shares. Consonance Capital Management, Columbus Circle Investors, and OrbiMed Advisors 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 Consonance Capital Management allocated the biggest weight to Tandem Diabetes Care Inc (NASDAQ:TNDM), around 5.97% of its portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 4.4 percent of its 13F equity portfolio to TNDM.

With a general bullishness amongst the heavyweights, some big names have jumped into Tandem Diabetes Care Inc (NASDAQ:TNDM) headfirst. Consonance Capital Management, managed by Mitchell Blutt, initiated the most outsized position in Tandem Diabetes Care Inc (NASDAQ:TNDM). Consonance Capital Management had $60.3 million invested in the company at the end of the quarter. Peter S. Park's Park West Asset Management also made a $32.4 million investment in the stock during the quarter. The other funds with brand new TNDM positions are Jeffrey Jay and David Kroin's Great Point Partners, Chuck Royce's Royce & Associates, and John Osterweis's Osterweis Capital Management.

Let's go over hedge fund activity in other stocks similar to Tandem Diabetes Care Inc (NASDAQ:TNDM). These stocks are CarGurus, Inc. (NASDAQ:CARG), White Mountains Insurance Group Ltd (NYSE:WTM), Colfax Corporation (NYSE:CFX), and Macquarie Infrastructure Corporation (NYSE:MIC). This group of 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 CARG,21,813076,1 WTM,16,185765,-1 CFX,30,652861,3 MIC,26,231644,-2 Average,23.25,470837,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $587 million in TNDM's case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Tandem Diabetes Care Inc (NASDAQ:TNDM) is more popular among hedge funds. 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. Hedge funds were also right about betting on TNDM as the stock returned 17% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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