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Is Insmed Incorporated (INSM) Going to Burn These Hedge Funds?

In this article we will take a look at whether hedge funds think Insmed Incorporated (NASDAQ:INSM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Insmed Incorporated (NASDAQ:INSM) was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. INSM has seen a decrease in enthusiasm from smart money lately. There were 25 hedge funds in our database with INSM positions at the end of the previous quarter. Our calculations also showed that INSM isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 21st century investor’s toolkit there are several signals stock market investors put to use to size up their holdings. A couple of the less known signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top money managers can beat the S&P 500 by a healthy amount (see the details here).

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action regarding Insmed Incorporated (NASDAQ:INSM).

How have hedgies been trading Insmed Incorporated (NASDAQ:INSM)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INSM over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is INSM A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, William Leland Edwards’s Palo Alto Investors has the largest position in Insmed Incorporated (NASDAQ:INSM), worth close to $97.1 million, accounting for 8.1% of its total 13F portfolio. The second largest stake is held by Point72 Asset Management, managed by Steve Cohen, which holds a $53.4 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish comprise Ken Griffin’s Citadel Investment Group, Julian Baker and Felix Baker’s Baker Bros. Advisors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Insmed Incorporated (NASDAQ:INSM), around 8.13% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 1.73 percent of its 13F equity portfolio to INSM.

Since Insmed Incorporated (NASDAQ:INSM) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies who were dropping their positions entirely by the end of the first quarter. Interestingly, Albert Cha and Frank Kung’s Vivo Capital sold off the biggest position of the 750 funds watched by Insider Monkey, totaling close to $28.9 million in stock, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management was right behind this move, as the fund dumped about $19.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Insmed Incorporated (NASDAQ:INSM). These stocks are Forward Air Corporation (NASDAQ:FWRD), Builders FirstSource, Inc. (NASDAQ:BLDR), Shake Shack Inc (NYSE:SHAK), and Adtalem Global Education Inc. (NYSE:ATGE). This group of stocks’ market valuations resemble INSM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FWRD 17 78795 -3
BLDR 29 303590 -11
SHAK 22 393753 -3
ATGE 12 268581 -8
Average 20 261180 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $358 million in INSM’s case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Adtalem Global Education Inc. (NYSE:ATGE) is the least popular one with only 12 bullish hedge fund positions. Insmed Incorporated (NASDAQ:INSM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on INSM as the stock returned 74.2% during the second quarter and outperformed the market by an even larger margin.

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