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Was The Smart Money Right About Intuitive Surgical, Inc. (ISRG)?

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  • ISRG

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG) changed recently.

Is Intuitive Surgical, Inc. (NASDAQ:ISRG) a healthy stock for your portfolio? The best stock pickers were getting more bullish. The number of long hedge fund bets inched up by 7 lately. Intuitive Surgical, Inc. (NASDAQ:ISRG) was in 60 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 53. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. Our calculations also showed that ISRG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 53 hedge funds in our database with ISRG positions at the end of the first quarter.

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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Billionaire David Siegel's Top 10 Stock Picks
Billionaire David Siegel's Top 10 Stock Picks

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a gander at the fresh hedge fund action regarding Intuitive Surgical, Inc. (NASDAQ:ISRG).

Do Hedge Funds Think ISRG Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ISRG over the last 24 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Fisher Asset Management has a $1.2149 billion position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $291.2 million call position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism comprise Ken Griffin's Citadel Investment Group, John Overdeck and David Siegel's Two Sigma Advisors and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 5.21% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, designating 4.04 percent of its 13F equity portfolio to ISRG.

Consequently, some big names have jumped into Intuitive Surgical, Inc. (NASDAQ:ISRG) headfirst. Alyeska Investment Group, managed by Anand Parekh, initiated the largest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Alyeska Investment Group had $54.7 million invested in the company at the end of the quarter. Kevin Molloy's Iron Triangle Partners also initiated a $50.6 million position during the quarter. The other funds with new positions in the stock are Efrem Kamen's Pura Vida Investments, Ryan Caldwell's Chiron Investment Management, and Greg Martinez's Parkman Healthcare Partners.

Let's now take a look at hedge fund activity in other stocks similar to Intuitive Surgical, Inc. (NASDAQ:ISRG). These stocks are ServiceNow Inc (NYSE:NOW), Snap Inc. (NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), Stryker Corporation (NYSE:SYK), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks' market valuations are similar to ISRG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOW,91,7011424,-7 SNAP,64,5399955,-9 LMT,58,1565723,8 GSK,28,1466364,3 SPGI,71,7278360,5 SYK,48,3369193,2 MU,87,6333058,-13 Average,63.9,4632011,-1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 63.9 hedge funds with bullish positions and the average amount invested in these stocks was $4632 million. That figure was $3476 million in ISRG's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ISRG is 65.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. A small number of hedge funds were also right about betting on ISRG as the stock returned 17.8% since the end of the second quarter (through 10/29) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.