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Should You Buy Masimo Corporation (MASI)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 June. At Insider Monkey, we follow nearly 835 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 Masimo Corporation (NASDAQ:MASI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Masimo Corporation (NASDAQ:MASI) the right investment to pursue these days? The smart money is betting on the stock. The number of long hedge fund bets moved up by 1 recently. Our calculations also showed that MASI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the eyes of most shareholders, hedge funds are seen as unimportant, old investment vehicles of the past. While there are over 8000 funds in operation at the moment, Our experts hone in on the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people watch over the majority of the smart money’s total asset base, and by keeping track of their top stock picks, Insider Monkey has determined various investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the latest hedge fund action encompassing Masimo Corporation (NASDAQ:MASI).

What have hedge funds been doing with Masimo Corporation (NASDAQ:MASI)?

At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MASI over the last 18 quarters. So, let’s see 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 Masimo Corporation (NASDAQ:MASI), with a stake worth $60.2 million reported as of the end of September. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $30.4 million. GAMCO Investors, Marshall Wace LLP, and Royce & Associates 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 Blue Whale Capital allocated the biggest weight to Masimo Corporation (NASDAQ:MASI), around 2.01% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, designating 0.93 percent of its 13F equity portfolio to MASI.

As industrywide interest jumped, key hedge funds were breaking ground themselves. McKinley Capital Management, managed by Robert B. Gillam, initiated the biggest position in Masimo Corporation (NASDAQ:MASI). McKinley Capital Management had $4.7 million invested in the company at the end of the quarter. Stephen Yiu’s Blue Whale Capital also made a $4 million investment in the stock during the quarter. The following funds were also among the new MASI investors: David Harding’s Winton Capital Management, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Matthew L Pinz’s Pinz Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Masimo Corporation (NASDAQ:MASI) but similarly valued. We will take a look at Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), Wayfair Inc (NYSE:W), Service Corporation International (NYSE:SCI), and Bio-Techne Corporation (NASDAQ:TECH). This group of stocks’ market caps are similar to MASI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JAZZ 25 1192685 -2
W 33 1500314 -1
SCI 18 320390 -2
TECH 26 266703 5
Average 25.5 820023 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $820 million. That figure was $172 million in MASI’s case. Wayfair Inc (NYSE:W) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) is the least popular one with only 18 bullish hedge fund positions. Masimo Corporation (NASDAQ:MASI) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on MASI as the stock returned 10.2% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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