Is Insulet Corporation (PODD) A Good Stock To Buy?

Nina Todic

Mon, Apr 22, 2019, 6:17 PM

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' recent losses in Facebook. Let’s take a closer look at what the funds we track think about Insulet Corporation (NASDAQ:PODD) in this article.

Insulet Corporation (NASDAQ:PODD) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare PODD to other stocks including Morningstar, Inc. (NASDAQ:MORN), Ceridian HCM Holding Inc. (NYSE:CDAY), and Cable One Inc (NYSE:CABO) to get a better sense of its popularity.

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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

We're going to go over the fresh hedge fund action regarding Insulet Corporation (NASDAQ:PODD).

What have hedge funds been doing with Insulet Corporation (NASDAQ:PODD)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in PODD a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Insulet Corporation (NASDAQ:PODD) was held by D1 Capital Partners, which reported holding $132.9 million worth of stock at the end of September. It was followed by D E Shaw with a $109.9 million position. Other investors bullish on the company included Think Investments, Columbus Circle Investors, and Renaissance Technologies.

Because Insulet Corporation (NASDAQ:PODD) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies who sold off their positions entirely heading into Q3. Interestingly, John Overdeck and David Siegel's Two Sigma Advisors sold off the largest stake of all the hedgies tracked by Insider Monkey, worth close to $22.8 million in stock. Anand Parekh's fund, Alyeska Investment Group, also said goodbye to its stock, about $17.8 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Insulet Corporation (NASDAQ:PODD) but similarly valued. We will take a look at Morningstar, Inc. (NASDAQ:MORN), Ceridian HCM Holding Inc. (NYSE:CDAY), Cable One Inc (NYSE:CABO), and Leggett & Platt, Inc. (NYSE:LEG). All of these stocks' market caps are closest to PODD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MORN,20,191984,1 CDAY,17,541979,-1 CABO,15,562023,-3 LEG,9,34308,-1 Average,15.25,332574,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $393 million in PODD's case. Morningstar, Inc. (NASDAQ:MORN) is the most popular stock in this table. On the other hand Leggett & Platt, Inc. (NYSE:LEG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Insulet Corporation (NASDAQ:PODD) is more popular among hedge funds. Our calculations showed that the top 15 most popular stocks among hedge funds returned 21.3% year-to-date through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on PODD, though not to the same extent, as the stock returned 19.3% and outperformed the market as well.

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

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