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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about INMODE LTD. (NASDAQ:INMD).
Is INMD a good stock to buy now? Money managers were becoming hopeful. The number of long hedge fund bets rose by 5 lately. INMODE LTD. (NASDAQ:INMD) was in 16 hedge funds' portfolios at the end of September. The all time high for this statistic is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that INMD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with INMD positions at the end of the second quarter.
Video: 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' 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a glance at the key hedge fund action surrounding INMODE LTD. (NASDAQ:INMD).
Do Hedge Funds Think INMD Is A Good Stock To Buy Now?
At the end of September, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 45% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in INMD 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.
Of the funds tracked by Insider Monkey, Miura Global Management, managed by Pasco Alfaro and Richard Turnure, holds the number one position in INMODE LTD. (NASDAQ:INMD). Miura Global Management has a $33.9 million position in the stock, comprising 9.6% of its 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $19.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Guy Shahar's DSAM Partners, Renaissance Technologies and Mark Coe's Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to INMODE LTD. (NASDAQ:INMD), around 9.62% of its 13F portfolio. Noked Capital is also relatively very bullish on the stock, setting aside 4.06 percent of its 13F equity portfolio to INMD.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. DSAM Partners, managed by Guy Shahar, created the most valuable position in INMODE LTD. (NASDAQ:INMD). DSAM Partners had $13.4 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $9.9 million position during the quarter. The other funds with new positions in the stock are Roy Vermus and Shlomi Bracha's Noked Capital, Leonard Green's Leonard Green & Partners, and Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks similar to INMODE LTD. (NASDAQ:INMD). We will take a look at Inter Parfums, Inc. (NASDAQ:IPAR), Cinemark Holdings, Inc. (NYSE:CNK), First Financial Bancorp (NASDAQ:FFBC), Northwest Bancshares, Inc. (NASDAQ:NWBI), FBL Financial Group, Inc. (NYSE:FFG), Vista Outdoor Inc (NYSE:VSTO), and Calavo Growers, Inc. (NASDAQ:CVGW). This group of stocks' market caps are closest to INMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IPAR,17,61695,2 CNK,25,150590,1 FFBC,16,20797,3 NWBI,9,20409,1 FFG,11,46916,5 VSTO,28,257079,6 CVGW,11,80472,-3 Average,16.7,91137,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $111 million in INMD's case. Vista Outdoor Inc (NYSE:VSTO) is the most popular stock in this table. On the other hand Northwest Bancshares, Inc. (NASDAQ:NWBI) is the least popular one with only 9 bullish hedge fund positions. INMODE LTD. (NASDAQ:INMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INMD is 58.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on INMD as the stock returned 29.9% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.