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Is DexCom, Inc. (DXCM) Going to Burn These Hedge Funds?

Should a DexCom, Inc. (NASDAQ:DXCM) investor track the following data?

If you were to ask many traders, hedge funds are assumed to be overrated, old investment tools of an era lost to time. Although there are over 8,000 hedge funds trading currently, Insider Monkey looks at the aristocrats of this club, close to 525 funds. It is widely held that this group controls the lion’s share of all hedge funds’ total assets, and by watching their highest quality picks, we’ve figured out a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we‘ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as necessary, positive insider trading activity is a second way to analyze the world of equities. Just as you’d expect, there are lots of incentives for an executive to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the valuable potential of this method if piggybackers know where to look (learn more here).

DexCom, Inc.

Keeping this in mind, it’s important to examine the latest info for DexCom, Inc. (NASDAQ:DXCM).

How are hedge funds trading DexCom, Inc. (NASDAQ:DXCM)?

In preparation for the third quarter, a total of 11 of the hedge funds we track held long positions in this stock, a change of -42% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

When using filings from the hedgies we track, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management had the largest position in DexCom, Inc. (NASDAQ:DXCM), worth close to $36.4 million, comprising 1.1% of its total 13F portfolio. Coming in second is Drew Cupps of Cupps Capital Management, with a $32.7 million position; 2.6% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include Israel Englander’s Millennium Management, Richard Driehaus’s Driehaus Capital and Jim Simons’s Renaissance Technologies.

Judging by the fact that DexCom, Inc. (NASDAQ:DXCM) has experienced a fall in interest from upper-tier hedge fund managers, we can see that there exists a select few money managers who sold off their full holdings heading into Q2. At the top of the heap, SAC Subsidiary’s CR Intrinsic Investors said goodbye to the largest position of the 450+ funds we monitor, comprising close to $8.4 million in stock. Scott Burney’s fund, Bluefin Investment Management, also dropped its stock, about $8.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q2.

How have insiders been trading DexCom, Inc. (NASDAQ:DXCM)?

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the last 180-day time period, DexCom, Inc. (NASDAQ:DXCM) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to DexCom, Inc. (NASDAQ:DXCM). These stocks are ICU Medical, Incorporated (NASDAQ:ICUI), HeartWare International Inc (NASDAQ:HTWR), Insulet Corporation (NASDAQ:PODD), Endologix, Inc. (NASDAQ:ELGX), and Integra Lifesciences Holdings Corp (NASDAQ:IART). All of these stocks are in the medical instruments & supplies industry and their market caps are similar to DXCM’s market cap.

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