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Should You Buy DexCom, Inc. (NASDAQ:DXCM)?

DexCom, Inc. (NASDAQ:DXCM) was in 16 hedge funds’ portfolio at the end of December. DXCM investors should be aware of an increase in hedge fund interest recently. There were 15 hedge funds in our database with DXCM positions at the end of the previous quarter.

DexCom, Inc.

To the average investor, there are dozens of indicators shareholders can use to watch the equity markets. A duo of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform their index-focused peers by a very impressive margin (see just how much).

Equally as beneficial, positive insider trading sentiment is another way to parse down the stock market universe. As the old adage goes: there are plenty of reasons for an executive to downsize shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several academic studies have demonstrated the valuable potential of this method if you understand where to look (learn more here).

Consequently, it’s important to take a look at the recent action surrounding DexCom, Inc. (NASDAQ:DXCM).

What have hedge funds been doing with DexCom, Inc. (NASDAQ:DXCM)?

In preparation for this year, a total of 16 of the hedge funds we track were long in this stock, a change of 7% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably.

According to our comprehensive database, Jérôme Pfund and Michael Sjöström’s Sectoral Asset Management had the most valuable position in DexCom, Inc. (NASDAQ:DXCM), worth close to $22 million, accounting for 0.8% of its total 13F portfolio. Coming in second is Bluefin Investment Management, managed by Scott Burney, which held a $12 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include Drew Cupps’s Cupps Capital Management, SAC Subsidiary’s CR Intrinsic Investors and Malcolm Fairbairn’s Ascend Capital.

As aggregate interest increased, key money managers have been driving this bullishness. Manatuck Hill Partners, managed by Mark Broach, established the most outsized position in DexCom, Inc. (NASDAQ:DXCM). Manatuck Hill Partners had 3 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $1 million investment in the stock during the quarter.

How are insiders trading DexCom, Inc. (NASDAQ:DXCM)?

Bullish insider trading is best served when the company we’re looking at has seen transactions within the past 180 days. Over the last half-year time frame, DexCom, Inc. (NASDAQ:DXCM) has seen 1 unique insiders buying, and 7 insider sales (see the details of insider trades here).

With the returns exhibited by the aforementioned research, retail investors should always keep an eye on hedge fund and insider trading activity, and DexCom, Inc. (NASDAQ:DXCM) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.