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 third 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 4 years and analyze what the smart money thinks of Inspire Medical Systems, Inc. (NYSE:INSP) based on that data.
Inspire Medical Systems, Inc. (NYSE:INSP) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that INSP 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.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a look at the key hedge fund action encompassing Inspire Medical Systems, Inc. (NYSE:INSP).
What does smart money think about Inspire Medical Systems, Inc. (NYSE:INSP)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2019. The graph below displays the percent of hedge funds with bullish position in INSP over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions). According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in Inspire Medical Systems, Inc. (NYSE:INSP). OrbiMed Advisors has a $89,8 million position in the stock, comprising 1,7% of its 13F portfolio. The second most bullish fund manager is Columbus Circle Investors, led by Principal Global Investors, holding a $37,3 million position; the fund has 1,4% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Richard Driehaus's Driehaus Capital, David E. Shaw's D E Shaw and Efrem Kamen's Pura Vida Investments. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Inspire Medical Systems, Inc. (NYSE:INSP), around 7,65% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, earmarking 2,88 percent of its 13F equity portfolio to INSP.
Seeing as Inspire Medical Systems, Inc. (NYSE:INSP) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of money managers that slashed their full holdings by the end of the third quarter. Intriguingly, Israel Englander's Millennium Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $9,5 million in stock, and James E. Flynn's Deerfield Management was right behind this move, as the fund dropped about $9,2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Inspire Medical Systems, Inc. (NYSE:INSP) but similarly valued. These stocks are Rambus Inc. (NASDAQ:RMBS), Tri Continental Corporation (NYSE:TY), Rush Enterprises, Inc. (NASDAQ:RUSHB), and trivago N.V. (NASDAQ:TRVG). This group of stocks' market valuations match INSP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMBS,22,153424,6 TY,1,1233,0 RUSHB,3,36150,1 TRVG,11,144580,2 Average,9,25,83847,2,25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9,25 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $288 million in INSP's case. Rambus Inc. (NASDAQ:RMBS) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 1 bullish hedge fund positions. Inspire Medical Systems, Inc. (NYSE:INSP) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on INSP as the stock returned 16,3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.