Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tandem Diabetes Care Inc (NASDAQ:TNDM).
Tandem Diabetes Care Inc (NASDAQ:TNDM) was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. TNDM has experienced a decrease in activity from the world’s largest hedge funds recently. There were 39 hedge funds in our database with TNDM positions at the end of the previous quarter. Our calculations also showed that TNDM 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.
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 58 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.
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 as well as this tiny lithium play. 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. With all of this in mind let’s take a glance at the latest hedge fund action surrounding Tandem Diabetes Care Inc (NASDAQ:TNDM).
What does smart money think about Tandem Diabetes Care Inc (NASDAQ:TNDM)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in TNDM a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Tandem Diabetes Care Inc (NASDAQ:TNDM) was held by Redmile Group, which reported holding $56.7 million worth of stock at the end of September. It was followed by Columbus Circle Investors with a $37.7 million position. Other investors bullish on the company included Renaissance Technologies, Deerfield Management, and Driehaus Capital. In terms of the portfolio weights assigned to each position Granite Point Capital allocated the biggest weight to Tandem Diabetes Care Inc (NASDAQ:TNDM), around 3.82% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 3.32 percent of its 13F equity portfolio to TNDM.
Since Tandem Diabetes Care Inc (NASDAQ:TNDM) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedgies that slashed their positions entirely in the first quarter. At the top of the heap, Samuel Isaly’s OrbiMed Advisors dropped the largest position of all the hedgies monitored by Insider Monkey, valued at about $68 million in stock, and Mitchell Blutt’s Consonance Capital Management was right behind this move, as the fund sold off about $32.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 11 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tandem Diabetes Care Inc (NASDAQ:TNDM) but similarly valued. We will take a look at Cree, Inc. (NASDAQ:CREE), First Financial Bankshares Inc (NASDAQ:FFIN), Southwest Gas Holdings, Inc. (NYSE:SWX), and American Campus Communities, Inc. (NYSE:ACC). This group of stocks’ market valuations resemble TNDM’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 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $246 million in TNDM’s case. Cree, Inc. (NASDAQ:CREE) is the most popular stock in this table. On the other hand Southwest Gas Holdings, Inc. (NYSE:SWX) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Tandem Diabetes Care Inc (NASDAQ:TNDM) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on TNDM as the stock returned 29.2% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.