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In this article you are going to find out whether hedge funds think ResMed Inc. (NYSE:RMD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is RMD stock a buy? Money managers were becoming less hopeful. The number of long hedge fund positions shrunk by 8 lately. ResMed Inc. (NYSE:RMD) was in 27 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that RMD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Keeping this in mind let's take a peek at the new hedge fund action encompassing ResMed Inc. (NYSE:RMD).
Do Hedge Funds Think RMD Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RMD over the last 22 quarters. So, let's see 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, Ako Capital, managed by Nicolai Tangen, holds the number one position in ResMed Inc. (NYSE:RMD). Ako Capital has a $75.7 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $71.2 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Phill Gross and Robert Atchinson's Adage Capital Management and Bryan Hinmon's Motley Fool Asset Management. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to ResMed Inc. (NYSE:RMD), around 2.08% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, dishing out 1.65 percent of its 13F equity portfolio to RMD.
Judging by the fact that ResMed Inc. (NYSE:RMD) has faced declining sentiment from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedge funds that slashed their full holdings last quarter. Interestingly, Peter Muller's PDT Partners dumped the largest position of the 750 funds monitored by Insider Monkey, worth close to $6.5 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund cut about $4.3 million worth. These moves are interesting, as total hedge fund interest dropped by 8 funds last quarter.
Let's now review hedge fund activity in other stocks similar to ResMed Inc. (NYSE:RMD). These stocks are Republic Services, Inc. (NYSE:RSG), QuantumScape Corporation (NYSE:QS), Zillow Group Inc (NASDAQ:Z), LyondellBasell Industries NV (NYSE:LYB), Phillips 66 (NYSE:PSX), XPeng Inc. (NYSE:XPEV), and Ball Corporation (NYSE:BLL). This group of stocks' market caps resemble RMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RSG,36,1099427,-1 QS,35,1848564,35 Z,83,5812175,14 LYB,27,682905,-4 PSX,26,191517,-1 XPEV,30,820952,4 BLL,44,944165,11 Average,40.1,1628529,8.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.1 hedge funds with bullish positions and the average amount invested in these stocks was $1629 million. That figure was $355 million in RMD's case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Phillips 66 (NYSE:PSX) is the least popular one with only 26 bullish hedge fund positions. ResMed Inc. (NYSE:RMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RMD is 21. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately RMD wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); RMD investors were disappointed as the stock returned -3.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.