How Did Hedge Funds’ DexCom, Inc. (DXCM) Bets Fare?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards DexCom, Inc. (NASDAQ:DXCM) at the end of the third quarter and determine whether the smart money was really smart about this stock.

DexCom, Inc. (NASDAQ:DXCM) was in 53 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 58. DXCM has seen an increase in activity from the world’s largest hedge funds of late. There were 49 hedge funds in our database with DXCM holdings at the end of June. Our calculations also showed that DXCM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to view the fresh hedge fund action encompassing DexCom, Inc. (NASDAQ:DXCM).

Ken Griffin of Citadel Investment Group

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

At third quarter’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DXCM over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lone Pine Capital was the largest shareholder of DexCom, Inc. (NASDAQ:DXCM), with a stake worth $788.1 million reported as of the end of September. Trailing Lone Pine Capital was Citadel Investment Group, which amassed a stake valued at $238.7 million. OrbiMed Advisors, Holocene Advisors, and Citadel Investment Group 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 Parkman Healthcare Partners allocated the biggest weight to DexCom, Inc. (NASDAQ:DXCM), around 6.29% of its 13F portfolio. Engine No. 1 LLC is also relatively very bullish on the stock, earmarking 5.07 percent of its 13F equity portfolio to DXCM.

As industrywide interest jumped, key hedge funds have jumped into DexCom, Inc. (NASDAQ:DXCM) headfirst. Echo Street Capital Management, managed by Greg Poole, established the largest position in DexCom, Inc. (NASDAQ:DXCM). Echo Street Capital Management had $60.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $27.3 million investment in the stock during the quarter. The other funds with new positions in the stock are James Crichton’s Hitchwood Capital Management, Stephen Yiu’s Blue Whale Capital, and Michael Rockefeller and KarláKroeker’s Woodline Partners.

Let’s now review hedge fund activity in other stocks similar to DexCom, Inc. (NASDAQ:DXCM). These stocks are The Progressive Corporation (NYSE:PGR), Metlife Inc (NYSE:MET), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Align Technology, Inc. (NASDAQ:ALGN), Lululemon Athletica inc. (NASDAQ:LULU), Public Storage (NYSE:PSA), and NXP Semiconductors NV (NASDAQ:NXPI). This group of stocks’ market caps resemble DXCM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PGR 47 1574950 3
MET 39 1145473 -2
IDXX 43 3698749 4
ALGN 49 2262912 -8
LULU 41 709432 -5
PSA 35 1260285 8
NXPI 51 1080819 -1
Average 43.6 1676089 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.6 hedge funds with bullish positions and the average amount invested in these stocks was $1676 million. That figure was $1782 million in DXCM’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Public Storage (NYSE:PSA) is the least popular one with only 35 bullish hedge fund positions. Compared to these stocks DexCom, Inc. (NASDAQ:DXCM) is more popular among hedge funds. Our overall hedge fund sentiment score for DXCM is 86.4. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, DXCM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DXCM were disappointed as the stock returned -21.3% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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