We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Biogen Inc. (NASDAQ: BIIB) and determine whether hedge funds skillfully traded this stock.
Is Biogen Inc. (NASDAQ: BIIB) a buy right now? Money managers were becoming less confident. The number of long hedge fund positions fell by 7 in recent months. Biogen Inc. (NASDAQ: BIIB) was in 63 hedge funds’ portfolios at the end of June. The all time high for this statistics is 81. Our calculations also showed that BIIB 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.
To most shareholders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, Our experts look at the elite of this group, about 850 funds. It is estimated that this group of investors administer the lion’s share of the hedge fund industry’s total capital, and by observing their first-class picks, Insider Monkey has revealed various investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year 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 .
Samuel Isaly of OrbiMed Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s view the recent hedge fund action encompassing Biogen Inc. (NASDAQ: BIIB).
Hedge fund activity in Biogen Inc. (NASDAQ:BIIB)
At Q2’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in BIIB a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Biogen Inc. (NASDAQ:BIIB), worth close to $1.045 billion, comprising 0.9% of its total 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $583.1 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include D. E. Shaw’s D E Shaw, Samuel Isaly’s OrbiMed Advisors and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 19.14% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, earmarking 9.69 percent of its 13F equity portfolio to BIIB.
Because Biogen Inc. (NASDAQ:BIIB) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds that slashed their entire stakes last quarter. Intriguingly, Brandon Haley’s Holocene Advisors sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $72 million in stock, and Stephen DuBois’s Camber Capital Management was right behind this move, as the fund sold off about $63.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 7 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Biogen Inc. (NASDAQ:BIIB). We will take a look at The Charles Schwab Corporation (NYSE: SCHW), General Dynamics Corporation (NYSE: GD), Vodafone Group Plc (NASDAQ: VOD), National Grid plc (NYSE: NGG), Ferrari N.V. (NYSE: RACE), Koninklijke Philips NV (NYSE: PHG), and Ambev SA (NYSE: ABEV). This group of stocks’ market values match BIIB’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCHW,71,3295929,9 GD,42,5491682,3 VOD,16,726090,2 NGG,2,430749,-4 RACE,25,1361698,-4 PHG,6,83694,-5 ABEV,13,517659,4 Average,25,1701072,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1701 million. That figure was $3268 million in BIIB’s case. The Charles Schwab Corporation (NYSE: SCHW) is the most popular stock in this table. On the other hand National Grid plc (NYSE: NGG) is the least popular one with only 2 bullish hedge fund positions. Biogen Inc. (NASDAQ:BIIB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIIB is 65.5. 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 positive signal but 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately BIIB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned 3.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.