Do These Hedge Funds Regret Selling Intuitive Surgical, Inc. (ISRG)?

Abigail Fisher
·6 min read

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Intuitive Surgical, Inc. (NASDAQ:ISRG).

Intuitive Surgical, Inc. (NASDAQ:ISRG) investors should be aware of a decrease in hedge fund interest recently. Intuitive Surgical, Inc. (NASDAQ:ISRG) was in 43 hedge funds' portfolios at the end of June. The all time high for this statistics is 51. There were 50 hedge funds in our database with ISRG positions at the end of the first quarter. Our calculations also showed that ISRG isn't among the 30 most popular stocks among hedge funds (click for Q2 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 eyes of most market participants, hedge funds are perceived as slow, old financial tools of yesteryear. While there are greater than 8000 funds in operation at present, Our experts look at the moguls of this group, about 850 funds. It is estimated that this group of investors watch over the lion's share of all hedge funds' total capital, and by keeping track of their inimitable equity investments, Insider Monkey has formulated numerous investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we're going to review the latest hedge fund action surrounding Intuitive Surgical, Inc. (NASDAQ:ISRG).

What does smart money think about Intuitive Surgical, Inc. (NASDAQ:ISRG)?

At Q2's end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the first quarter of 2020. On the other hand, there were a total of 37 hedge funds with a bullish position in ISRG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ISRG A Good Stock To Buy?
Is ISRG A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Ken Fisher's Fisher Asset Management has the number one position in Intuitive Surgical, Inc. (NASDAQ:ISRG), worth close to $642.4 million, accounting for 0.6% of its total 13F portfolio. On Fisher Asset Management's heels is Ken Griffin of Citadel Investment Group, with a $225.9 million call position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise Phill Gross and Robert Atchinson's Adage Capital Management, Cliff Asness's AQR Capital Management and Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Intuitive Surgical, Inc. (NASDAQ:ISRG), around 4.07% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, designating 3.49 percent of its 13F equity portfolio to ISRG.

Due to the fact that Intuitive Surgical, Inc. (NASDAQ:ISRG) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of fund managers that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Rajiv Jain's GQG Partners said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $137.2 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $24.6 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks similar to Intuitive Surgical, Inc. (NASDAQ:ISRG). We will take a look at Anthem Inc (NYSE:ANTM), Fiserv, Inc. (NASDAQ:FISV), Booking Holdings Inc. (NASDAQ:BKNG), Zoetis Inc (NYSE:ZTS), VMware, Inc. (NYSE:VMW), Automatic Data Processing, Inc. (NASDAQ:ADP), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks' market valuations match ISRG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANTM,69,4103137,-1 FISV,85,4642685,18 BKNG,96,6098595,6 ZTS,58,1985007,-2 VMW,42,696435,15 ADP,49,1802478,3 REGN,49,1604372,7 Average,64,2990387,6.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $2990 million. That figure was $1095 million in ISRG's case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 42 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 24.2. 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. 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 gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. A small number of hedge funds were also right about betting on ISRG as the stock returned 29.1% since the end of the second quarter (through 10/23) and outperformed the market by an even larger margin.

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

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