The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 28th. In this article we look at what those investors think of DexCom, Inc. (NASDAQ:DXCM).
Is DexCom, Inc. (NASDAQ:DXCM) the right pick for your portfolio? Investors who are in the know are getting less bullish. The number of long hedge fund bets retreated by 3 in recent months. Our calculations also showed that DXCM isn't among the 30 most popular stocks among hedge funds (view the video below). DXCM was in 30 hedge funds' portfolios at the end of June. There were 33 hedge funds in our database with DXCM positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the new hedge fund action surrounding DexCom, Inc. (NASDAQ:DXCM).
How have hedgies been trading DexCom, Inc. (NASDAQ:DXCM)?
At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DXCM over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Principal Global Investors's Columbus Circle Investors has the number one position in DexCom, Inc. (NASDAQ:DXCM), worth close to $85.5 million, comprising 2.3% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $70.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Christopher James's Partner Fund Management.
Because DexCom, Inc. (NASDAQ:DXCM) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds that slashed their positions entirely by the end of the second quarter. At the top of the heap, Arthur B Cohen and Joseph Healey's Healthcor Management LP dumped the largest stake of all the hedgies watched by Insider Monkey, comprising close to $87 million in stock. Glenn Russell Dubin's fund, Highbridge Capital Management, also sold off its stock, about $17.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to DexCom, Inc. (NASDAQ:DXCM). We will take a look at Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Akamai Technologies, Inc. (NASDAQ:AKAM), Annaly Capital Management, Inc. (NYSE:NLY), and Hasbro, Inc. (NASDAQ:HAS). This group of stocks' market valuations are closest to DXCM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KOF,9,494995,0 AKAM,33,841204,5 NLY,21,224083,0 HAS,24,383765,6 Average,21.75,486012,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $486 million. That figure was $671 million in DXCM's case. Akamai Technologies, Inc. (NASDAQ:AKAM) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. DexCom, Inc. (NASDAQ:DXCM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DXCM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DXCM were disappointed as the stock returned -0.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.