Here’s What Hedge Funds Think About Intuitive Surgical, Inc. (ISRG)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG).

Intuitive Surgical, Inc. (NASDAQ:ISRG) investors should be aware of a decrease in hedge fund sentiment of late. ISRG was in 40 hedge funds’ portfolios at the end of March. There were 49 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Samuel Isaly - Orbimed Advisors

Let’s take a glance at the fresh hedge fund action encompassing Intuitive Surgical, Inc. (NASDAQ:ISRG).

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

At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in ISRG over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in Intuitive Surgical, Inc. (NASDAQ:ISRG) was held by Citadel Investment Group, which reported holding $292.7 million worth of stock at the end of March. It was followed by Millennium Management with a $219.6 million position. Other investors bullish on the company included Citadel Investment Group, OrbiMed Advisors, and AQR Capital Management.

Because Intuitive Surgical, Inc. (NASDAQ:ISRG) has faced declining sentiment from hedge fund managers, we can see that there was a specific group of hedgies that elected to cut their positions entirely heading into Q3. Interestingly, Jim Simons’s Renaissance Technologies dumped the largest position of all the hedgies watched by Insider Monkey, worth close to $110.4 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $7.8 million worth. These moves are interesting, as total hedge fund interest was cut by 9 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Intuitive Surgical, Inc. (NASDAQ:ISRG). We will take a look at The TJX Companies, Inc. (NYSE:TJX), Duke Energy Corporation (NYSE:DUK), The Bank of Nova Scotia (NYSE:BNS), and Canadian National Railway Company (NYSE:CNI). This group of stocks’ market caps match ISRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TJX 54 3003962 -4
DUK 26 1113817 9
BNS 14 518832 0
CNI 17 2175473 -7
Average 27.75 1703021 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1703 million. That figure was $1599 million in ISRG’s case. The TJX Companies, Inc. (NYSE:TJX) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ISRG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ISRG were disappointed as the stock returned -16.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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