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Is TransMedics Group, Inc. (TMDX) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of TransMedics Group, Inc. (NASDAQ:TMDX).

TransMedics Group, Inc. (NASDAQ:TMDX) investors should pay attention to a decrease in enthusiasm from smart money of late. Our calculations also showed that TMDX 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Abrams

David Abrams of Abrams Capital 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 stocks recommended/scorned by legendary Bill Miller. 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 view the key hedge fund action encompassing TransMedics Group, Inc. (NASDAQ:TMDX).

What have hedge funds been doing with TransMedics Group, Inc. (NASDAQ:TMDX)?

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TMDX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in TransMedics Group, Inc. (NASDAQ:TMDX) was held by Abrams Capital Management, which reported holding $42.3 million worth of stock at the end of September. It was followed by Zimmer Partners with a $5.7 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.

Seeing as TransMedics Group, Inc. (NASDAQ:TMDX) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of hedgies who were dropping their full holdings last quarter. At the top of the heap, Jeffrey Talpins’s Element Capital Management sold off the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $1.2 million in stock. Mark Wolfson and Jamie Alexander’s fund, Jasper Ridge Partners, also said goodbye to its stock, about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to TransMedics Group, Inc. (NASDAQ:TMDX). These stocks are Oppenheimer Holdings Inc. (NYSE:OPY), Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), Atlas Technical Consultants, Inc. (NASDAQ:ATCX), and Insteel Industries Inc (NASDAQ:IIIN). This group of stocks’ market valuations are closest to TMDX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OPY 9 22234 1
SYRS 11 43061 -2
ATCX 11 11058 0
IIIN 11 20786 5
Average 10.5 24285 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $48 million in TMDX’s case. Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) is the most popular stock in this table. On the other hand Oppenheimer Holdings Inc. (NYSE:OPY) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks TransMedics Group, Inc. (NASDAQ:TMDX) is even less popular than OPY. Hedge funds dodged a bullet by taking a bearish stance towards TMDX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately TMDX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TMDX investors were disappointed as the stock returned 9.4% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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