Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ResMed Inc. (NYSE:RMD), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is RMD a good stock to buy now? The best stock pickers were taking an optimistic view. The number of bullish hedge fund bets advanced by 10 lately. ResMed Inc. (NYSE:RMD) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RMD 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s take a gander at the new hedge fund action surrounding ResMed Inc. (NYSE:RMD).
Do Hedge Funds Think RMD Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RMD over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of ResMed Inc. (NYSE:RMD), with a stake worth $58.8 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $35 million. Motley Fool Asset Management, Adage Capital Management, and Marshall Wace LLP 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 Motley Fool Asset Management allocated the biggest weight to ResMed Inc. (NYSE:RMD), around 2.07% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, setting aside 1.83 percent of its 13F equity portfolio to RMD.
Now, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in ResMed Inc. (NYSE:RMD). Marshall Wace LLP had $13.3 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $6.2 million investment in the stock during the quarter. The following funds were also among the new RMD investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Renaissance Technologies, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks similar to ResMed Inc. (NYSE:RMD). We will take a look at Tencent Music Entertainment Group (NYSE:TME), Aptiv PLC (NYSE:APTV), Fiat Chrysler Automobiles NV (NYSE:FCAU), Corning Incorporated (NYSE:GLW), Copart, Inc. (NASDAQ:CPRT), RingCentral Inc (NYSE:RNG), and Credit Suisse Group AG (NYSE:CS). This group of stocks’ market values are closest to RMD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TME | 24 | 571503 | -6 |
| APTV | 38 | 1355332 | -5 |
| FCAU | 20 | 218304 | 0 |
| GLW | 36 | 346549 | 8 |
| CPRT | 56 | 1077546 | -4 |
| RNG | 59 | 3300948 | -3 |
| CS | 13 | 68386 | -1 |
| Average | 35.1 | 991224 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $991 million. That figure was $237 million in RMD’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 13 bullish hedge fund positions. ResMed Inc. (NYSE:RMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RMD is 63.9. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on RMD as the stock returned 27.7% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
Follow Resmed Inc (NYSE:RMD)
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Disclosure: None. This article was originally published at Insider Monkey.
