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How Did Intuitive Surgical, Inc. (ISRG) Compare Against Top Hedge Fund Stocks in 2019?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Intuitive Surgical, Inc. (NASDAQ:ISRG).

Is Intuitive Surgical, Inc. (NASDAQ:ISRG) an attractive investment now? Hedge funds are betting on the stock. The number of long hedge fund positions went up by 4 lately. Our calculations also showed that ISRG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). ISRG was in 41 hedge funds’ portfolios at the end of the third quarter of 2019. There were 37 hedge funds in our database with ISRG positions at the end of the previous quarter.

In the 21st century investor’s toolkit there are plenty of metrics market participants have at their disposal to grade publicly traded companies. A pair of the less known metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a healthy margin (see the details here).

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s analyze the key hedge fund action regarding Intuitive Surgical, Inc. (NASDAQ:ISRG).

What have hedge funds been doing with Intuitive Surgical, Inc. (NASDAQ:ISRG)?

Heading into the fourth quarter of 2019, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2019. On the other hand, there were a total of 44 hedge funds with a bullish position in ISRG a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is ISRG A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Coatue Management, managed by Philippe Laffont, holds the biggest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Coatue Management has a $287.9 million position in the stock, comprising 2.5% of its 13F portfolio. The second most bullish fund manager is Arthur B Cohen and Joseph Healey of Healthcor Management, with a $127 million position; the fund has 4.8% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Samuel Isaly’s OrbiMed Advisors, Ken Griffin’s Citadel Investment Group and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Healthcor Management allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 4.8% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 3.28 percent of its 13F equity portfolio to ISRG.

As one would reasonably expect, key hedge funds have jumped into Intuitive Surgical, Inc. (NASDAQ:ISRG) headfirst. Healthcor Management, managed by Arthur B Cohen and Joseph Healey, initiated the biggest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Healthcor Management had $127 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $85.7 million investment in the stock during the quarter. The other funds with brand new ISRG positions are Stanley Druckenmiller’s Duquesne Capital, Benjamin A. Smith’s Laurion Capital Management, and Ray Dalio’s Bridgewater Associates.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Intuitive Surgical, Inc. (NASDAQ:ISRG) but similarly valued. These stocks are Anthem Inc (NYSE:ANTM), VMware, Inc. (NYSE:VMW), S&P Global Inc. (NYSE:SPGI), and Zoetis Inc (NYSE:ZTS). All of these stocks’ market caps are closest to ISRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANTM 59 3721999 -7
VMW 35 985185 1
SPGI 69 3925199 11
ZTS 46 2229489 6
Average 52.25 2715468 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.25 hedge funds with bullish positions and the average amount invested in these stocks was $2715 million. That figure was $1401 million in ISRG’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 35 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ISRG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ISRG investors were disappointed as the stock returned 24.7% in 2019 (as of 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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