Was The Smart Money Right About Intuitive Surgical (ISRG)?

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG).

Is Intuitive Surgical, Inc. (NASDAQ:ISRG) a cheap investment now? Hedge funds were cutting their exposure. The number of long hedge fund bets were cut by 1 lately. Intuitive Surgical, Inc. (NASDAQ:ISRG) was in 49 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 51. Our calculations also showed that ISRG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the recent hedge fund action encompassing Intuitive Surgical, Inc. (NASDAQ:ISRG).

Do Hedge Funds Think ISRG Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the third quarter of 2020. By comparison, 51 hedge funds held shares or bullish call options in ISRG a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of Intuitive Surgical, Inc. (NASDAQ:ISRG), with a stake worth $1000.9 million reported as of the end of December. Trailing Fisher Asset Management was AQR Capital Management, which amassed a stake valued at $108 million. Rock Springs Capital Management, Adage Capital Management, and OrbiMed Advisors 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 Unio Capital allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 4.11% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, designating 2.08 percent of its 13F equity portfolio to ISRG.

Since Intuitive Surgical, Inc. (NASDAQ:ISRG) has witnessed declining sentiment from the smart money, we can see that there lies a certain “tier” of funds that elected to cut their full holdings heading into Q1. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $11.6 million in stock. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also dropped its stock, about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q1.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Intuitive Surgical, Inc. (NASDAQ:ISRG) but similarly valued. These stocks are General Electric Company (NYSE:GE), Rio Tinto Group (NYSE:RIO), Diageo plc (NYSE:DEO), GlaxoSmithKline plc (NYSE:GSK), Stryker Corporation (NYSE:SYK), Booking Holdings Inc. (NASDAQ:BKNG), and The Goldman Sachs Group, Inc. (NYSE:GS). This group of stocks’ market valuations match ISRG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GE 69 5684620 24
RIO 26 1711997 3
DEO 23 667041 4
GSK 30 1742036 -1
SYK 44 3222907 -4
BKNG 108 8247434 -5
GS 76 4607743 6
Average 53.7 3697683 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.7 hedge funds with bullish positions and the average amount invested in these stocks was $3698 million. That figure was $1802 million in ISRG’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 23 bullish hedge fund positions. Intuitive Surgical, Inc. (NASDAQ:ISRG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ISRG is 48.1. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately ISRG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ISRG investors were disappointed as the stock returned 5.7% since the end of December (through 4/30) 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 in 2020.

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