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Did Hedge Funds Make The Right Call On Insulet Corporation (PODD) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtInsulet Corporation (NASDAQ:PODD) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Insulet Corporation (NASDAQ:PODD) has seen an increase in hedge fund interest recently. Our calculations also showed that PODD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now let’s take a look at the latest hedge fund action surrounding Insulet Corporation (NASDAQ:PODD).

Hedge fund activity in Insulet Corporation (NASDAQ:PODD)

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in PODD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PODD A Good Stock To Buy?

Among these funds, Coatue Management held the most valuable stake in Insulet Corporation (NASDAQ:PODD), which was worth $238 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $72.3 million worth of shares. Renaissance Technologies, Rock Springs Capital Management, and Fisher 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 Think Investments allocated the biggest weight to Insulet Corporation (NASDAQ:PODD), around 10.89% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, designating 3.02 percent of its 13F equity portfolio to PODD.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, assembled the most outsized position in Insulet Corporation (NASDAQ:PODD). Fisher Asset Management had $45 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also made a $13.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Steve Cohen’s Point72 Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to Insulet Corporation (NASDAQ:PODD). We will take a look at Occidental Petroleum Corporation (NYSE:OXY), Pembina Pipeline Corp (NYSE:PBA), Icahn Enterprises LP (NASDAQ:IEP), and Ingersoll Rand Inc. (NYSE:IR). This group of stocks’ market values match PODD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OXY 35 1384528 -9
PBA 15 52363 -2
IEP 3 9602364 -1
IR 33 490015 -14
Average 21.5 2882318 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $2882 million. That figure was $648 million in PODD’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Insulet Corporation (NASDAQ:PODD) is more popular among hedge funds. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately PODD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PODD were disappointed as the stock returned 17.3% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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