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Is TNDM A Good Stock To Buy According To Hedge Funds?

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Reymerlyn Martin
·6 min read
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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Tandem Diabetes Care Inc (NASDAQ:TNDM).

Is TNDM a good stock to buy? Tandem Diabetes Care Inc (NASDAQ:TNDM) has experienced a decrease in enthusiasm from smart money lately. Tandem Diabetes Care Inc (NASDAQ:TNDM) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic is 39. There were 32 hedge funds in our database with TNDM holdings at the end of June. Our calculations also showed that TNDM 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let's take a peek at the new hedge fund action regarding Tandem Diabetes Care Inc (NASDAQ:TNDM).

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

At the end of September, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TNDM over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Columbus Circle Investors held the most valuable stake in Tandem Diabetes Care Inc (NASDAQ:TNDM), which was worth $65 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $50.3 million worth of shares. Driehaus Capital, Millennium Management, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Columbus Circle Investors allocated the biggest weight to Tandem Diabetes Care Inc (NASDAQ:TNDM), around 2.83% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 2.18 percent of its 13F equity portfolio to TNDM.

Since Tandem Diabetes Care Inc (NASDAQ:TNDM) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who were dropping their entire stakes heading into Q4. Intriguingly, Peter S. Park's Park West Asset Management sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $14.8 million in stock. Michael Gelband's fund, ExodusPoint Capital, also said goodbye to its stock, about $11.7 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q4.

Let's check out hedge fund activity in other stocks similar to Tandem Diabetes Care Inc (NASDAQ:TNDM). We will take a look at Morningstar, Inc. (NASDAQ:MORN), UGI Corp (NYSE:UGI), Vedanta Ltd (NYSE:VEDL), iRhythm Technologies, Inc. (NASDAQ:IRTC), B2Gold Corp (NYSE:BTG), American Well Corporation (NYSE:AMWL), and Omega Healthcare Investors Inc (NYSE:OHI). This group of stocks' market valuations match TNDM's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MORN,21,376758,1 UGI,23,181941,-3 VEDL,9,33062,0 IRTC,26,445527,5 BTG,17,583145,-1 AMWL,25,306967,25 OHI,19,106290,-4 Average,20,290527,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $380 million in TNDM's case. iRhythm Technologies, Inc. (NASDAQ:IRTC) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Tandem Diabetes Care Inc (NASDAQ:TNDM) is more popular among hedge funds. Our overall hedge fund sentiment score for TNDM is 76.1. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Unfortunately TNDM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TNDM were disappointed as the stock returned -20.7% since the end of the third quarter (through 12/18) 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 most of these stocks already outperformed the market in 2020.

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

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