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Is iRhythm Technologies, Inc. (IRTC) Going To Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded iRhythm Technologies, Inc. (NASDAQ:IRTC) based on those filings.

Is iRhythm Technologies, Inc. (NASDAQ:IRTC) a first-rate investment right now? Prominent investors are taking a bullish view. The number of bullish hedge fund bets went up by 1 in recent months. Our calculations also showed that IRTC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action surrounding iRhythm Technologies, Inc. (NASDAQ:IRTC).

Hedge fund activity in iRhythm Technologies, Inc. (NASDAQ:IRTC)

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IRTC over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Partner Fund Management was the largest shareholder of iRhythm Technologies, Inc. (NASDAQ:IRTC), with a stake worth $80.1 million reported as of the end of September. Trailing Partner Fund Management was Rock Springs Capital Management, which amassed a stake valued at $41.1 million. Millennium Management, Sectoral Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to iRhythm Technologies, Inc. (NASDAQ:IRTC), around 2.4% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, dishing out 2.37 percent of its 13F equity portfolio to IRTC.

As industrywide interest jumped, key money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the most valuable call position in iRhythm Technologies, Inc. (NASDAQ:IRTC). Holocene Advisors had $7.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as iRhythm Technologies, Inc. (NASDAQ:IRTC) but similarly valued. We will take a look at Sunrun Inc (NASDAQ:RUN), Lions Gate Entertainment Corporation (NYSE:LGF-A), Lions Gate Entertainment Corporation (NYSE:LGF-B), and Capitol Federal Financial, Inc. (NASDAQ:CFFN). All of these stocks’ market caps are closest to IRTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RUN 18 582758 1
LGF-A 16 179155 -5
LGF-B 15 184828 0
CFFN 14 145455 3
Average 15.75 273049 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $196 million in IRTC’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Capitol Federal Financial, Inc. (NASDAQ:CFFN) is the least popular one with only 14 bullish hedge fund positions. iRhythm Technologies, Inc. (NASDAQ:IRTC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IRTC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IRTC were disappointed as the stock returned -2.7% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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