We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards DexCom, Inc. (NASDAQ:DXCM).
Is DXCM a good stock to buy now? DexCom, Inc. (NASDAQ:DXCM) has experienced an increase in activity from the world’s largest hedge funds in recent months. DexCom, Inc. (NASDAQ:DXCM) was in 58 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 58. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DXCM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of metrics shareholders have at their disposal to assess stocks. Two of the most innovative metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the S&P 500 by a healthy amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s go over the key hedge fund action regarding DexCom, Inc. (NASDAQ:DXCM).
What have hedge funds been doing with DexCom, Inc. (NASDAQ:DXCM)?
Heading into the fourth quarter of 2020, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in DXCM a year ago. 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 DexCom, Inc. (NASDAQ:DXCM) was held by Renaissance Technologies, which reported holding $301.7 million worth of stock at the end of September. It was followed by GQG Partners with a $277.7 million position. Other investors bullish on the company included Lone Pine Capital, Holocene Advisors, and OrbiMed Advisors. In terms of the portfolio weights assigned to each position Parkman Healthcare Partners allocated the biggest weight to DexCom, Inc. (NASDAQ:DXCM), around 3.23% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, setting aside 2.83 percent of its 13F equity portfolio to DXCM.
As aggregate interest increased, key hedge funds were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, created the biggest position in DexCom, Inc. (NASDAQ:DXCM). Senator Investment Group had $51.5 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $7.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s check out hedge fund activity in other stocks similar to DexCom, Inc. (NASDAQ:DXCM). We will take a look at Emerson Electric Co. (NYSE:EMR), Public Storage (NYSE:PSA), Itau Unibanco Holding SA (NYSE:ITUB), Keurig Dr Pepper Inc. (NASDAQ:KDP), Snap Inc. (NYSE:SNAP), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), and Carvana Co. (NYSE:CVNA). This group of stocks’ market valuations are closest to DXCM’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1430 million. That figure was $1517 million in DXCM’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 8 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 88. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately DXCM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DXCM were disappointed as the stock returned -19.2% since the end of the third quarter (through 12/2) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.