Is Intuitive Surgical, Inc. (NASDAQ:ISRG) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Intuitive Surgical, Inc. (NASDAQ:ISRG) has seen a decrease in hedge fund sentiment in recent months. Our calculations also showed that ISRG isn't among the 30 most popular stocks among hedge funds (see the video below). 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Let's take a glance at the key hedge fund action regarding Intuitive Surgical, Inc. (NASDAQ:ISRG).
How have hedgies been trading Intuitive Surgical, Inc. (NASDAQ:ISRG)?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ISRG over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Coatue Management was the largest shareholder of Intuitive Surgical, Inc. (NASDAQ:ISRG), with a stake worth $302.5 million reported as of the end of March. Trailing Coatue Management was Citadel Investment Group, which amassed a stake valued at $185 million. AQR Capital Management, OrbiMed Advisors, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Intuitive Surgical, Inc. (NASDAQ:ISRG) has faced a decline in interest from the smart money, logic holds that there was a specific group of money managers who were dropping their entire stakes by the end of the second quarter. Intriguingly, Arthur B Cohen and Joseph Healey's Healthcor Management LP dumped the biggest investment of the 750 funds tracked by Insider Monkey, comprising close to $76.9 million in stock. Stanley Druckenmiller's fund, Duquesne Capital, also cut its stock, about $74.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Intuitive Surgical, Inc. (NASDAQ:ISRG). We will take a look at Boston Scientific Corporation (NYSE:BSX), Eni SpA (NYSE:E), The Southern Company (NYSE:SO), and S&P Global Inc. (NYSE:SPGI). This group of stocks' market valuations match ISRG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BSX,50,2980786,3 E,5,79240,-4 SO,22,835876,3 SPGI,58,4351436,4 Average,33.75,2061835,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $2062 million. That figure was $994 million in ISRG's case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ISRG, though not to the same extent, as the stock returned 2.9% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.