How Does Smart Money Feel About Intuitive Surgical, Inc. (ISRG)?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG) during the quarter below.

Is Intuitive Surgical, Inc. (NASDAQ:ISRG) a superb stock to buy now? Investors who are in the know are getting more bullish. The number of long hedge fund positions has edged up by two recently. ISRG was in 34 hedge funds’ portfolios at the end of September. There were 32 hedge funds in our database with ISRG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness an increase in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Macy’s, Inc. (NYSE:M), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Hormel Foods Corporation (NYSE:HRL) to gather more data points.

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To most investors, hedge funds are perceived as slow, outdated financial tools of the past. While there are greater than 8000 funds trading today, our researchers hone in on the bigwigs of this club, approximately 700 funds. These money managers handle the majority of the hedge fund industry’s total capital, and by shadowing their top equity investments, Insider Monkey has discovered various investment strategies that have historically surpassed Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, we’re going to check out the new action surrounding Intuitive Surgical, Inc. (NASDAQ:ISRG).

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

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). OrbiMed Advisors has a $109.8 million position in the stock, comprising 1.1% of its 13F portfolio. Coming in second is Columbus Circle Investors, managed by Clifford Fox, which holds a $106.9 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Jim Simons’s Renaissance Technologies, Anand Parekh’s Alyeska Investment Group and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in Intuitive Surgical, Inc. (NASDAQ:ISRG). Marshall Wace LLP had $25.4 million invested in the company at the end of the quarter. Paul Sinclair’s Blue Jay Capital Management also initiated an $13.8 million position during the quarter. The following funds were also among the new ISRG investors: Charles Clough’s Clough Capital Partners, Joel Greenblatt’s Gotham Asset Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intuitive Surgical, Inc. (NASDAQ:ISRG) but similarly valued. We will take a look at Macy’s, Inc. (NYSE:M), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Hormel Foods Corporation (NYSE:HRL), and Sigma-Aldrich Corporation (NASDAQ:SIAL). 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
M 67 1592888 6
BMRN 50 1742311 1
HRL 15 192187 -6
SIAL 34 1572116 -3

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1.28 billion. Macy’s, Inc. (NYSE:M) is the most popular stock in this table with 67 funds holding long stakes as of September 30. When we compare Intuitive Surgical to these stocks, we notice that hedge funds amassed $962 million worth of its stock, and its popularity is also below average. Therefore, the other stocks from the list, such as Macy’s may be a better alternative for a long position. In any case, a more detailed analysis is required to get a cleared picture.