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Were Hedge Funds Right About Intuitive Surgical, Inc. (ISRG)?

Asma UL Husna

Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG).

Intuitive Surgical, Inc. (NASDAQ:ISRG) has seen an increase in hedge fund sentiment in recent months. ISRG was in 51 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 45 hedge funds in our database with ISRG holdings at the end of the previous quarter. Our calculations also showed that ISRG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

According to most stock holders, hedge funds are viewed as worthless, outdated investment tools of the past. While there are more than 8000 funds trading at the moment, Our researchers look at the masters of this club, about 850 funds. These investment experts manage bulk of the hedge fund industry's total capital, and by keeping track of their unrivaled equity investments, Insider Monkey has identified a number of investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_30602" align="aligncenter" width="397"] Philippe Laffont of Coatue Management[/caption]

COATUE MANAGEMENT

Keeping this in mind we're going to analyze the fresh hedge fund action regarding Intuitive Surgical, Inc. (NASDAQ:ISRG).

How are hedge funds trading Intuitive Surgical, Inc. (NASDAQ:ISRG)?

At Q4's end, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ISRG over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in Intuitive Surgical, Inc. (NASDAQ:ISRG) was held by Coatue Management, which reported holding $167.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $159.7 million position. Other investors bullish on the company included OrbiMed Advisors, GQG Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 3.23% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 2.85 percent of its 13F equity portfolio to ISRG.

With a general bullishness amongst the heavyweights, some big names have jumped into Intuitive Surgical, Inc. (NASDAQ:ISRG) headfirst. Renaissance Technologies, created the largest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Renaissance Technologies had $70.8 million invested in the company at the end of the quarter. Kevin Molloy's Iron Triangle Partners also made a $10.2 million investment in the stock during the quarter. The following funds were also among the new ISRG investors: Peter Muller's PDT Partners, Greg Martinez's Parkman Healthcare Partners, and David Harding's Winton Capital Management.

Let's also examine hedge fund activity in other stocks similar to Intuitive Surgical, Inc. (NASDAQ:ISRG). We will take a look at Intuit Inc. (NASDAQ:INTU), Vale SA (NYSE:VALE), The Blackstone Group Inc. (NYSE:BX), and T-Mobile US, Inc. (NASDAQ:TMUS). All of these stocks' market caps are similar to ISRG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INTU,54,1701224,-1 VALE,26,1762450,-3 BX,47,1192894,5 TMUS,61,1396533,-3 Average,47,1513275,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $1513 million. That figure was $1118 million in ISRG's case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 26 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately ISRG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ISRG were disappointed as the stock returned -15.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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