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Is Illumina, Inc. (ILMN) Going to Burn These Hedge Funds?

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If you were to ask many investors, hedge funds are assumed to be useless, old investment tools of a period lost to current times. Although there are more than 8,000 hedge funds with their doors open currently, Insider Monkey focuses on the aristocrats of this group, around 525 funds. It is assumed that this group controls the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their highest performing investments, we’ve determined a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Equally as crucial, bullish insider trading sentiment is another way to analyze the investments you’re interested in. Just as you’d expect, there are a number of motivations for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the impressive potential of this method if shareholders know where to look (learn more here).

Now that that’s out of the way, we’re going to analyze the recent info surrounding Illumina, Inc. (NASDAQ:ILMN).

What does the smart money think about Illumina, Inc. (NASDAQ:ILMN)?

Heading into Q3, a total of 29 of the hedge funds we track held long positions in this stock, a change of 4% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably.

Illumina, Inc. (NASDAQ:ILMN)Out of the hedge funds we follow, OrbiMed Advisors, managed by Samuel Isaly, holds the most valuable position in Illumina, Inc. (NASDAQ:ILMN). OrbiMed Advisors has a $123.6 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Highfields Capital Management, managed by Jonathon Jacobson, which held a $111.4 million position; 0.9% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Bain Capital’s Brookside Capital and Andrew Sandler’s Sandler Capital Management.

Now, certain bigger names were leading the bulls’ herd. OrbiMed Advisors, managed by Samuel Isaly, established the most outsized position in Illumina, Inc. (NASDAQ:ILMN). OrbiMed Advisors had 123.6 million invested in the company at the end of the quarter. Jonathon Jacobson’s Highfields Capital Management also made a $111.4 million investment in the stock during the quarter. The other funds with brand new ILMN positions are JΘr⌠me Pfund and Michael Sj÷str÷m’s Sectoral Asset Management, Bain Capital’s Brookside Capital, and Andrew Sandler’s Sandler Capital Management.

Insider trading activity in Illumina, Inc. (NASDAQ:ILMN)

Insider buying made by high-level executives is at its handiest when the company in question has seen transactions within the past half-year. Over the last six-month time frame, Illumina, Inc. (NASDAQ:ILMN) has experienced zero unique insiders purchasing, and 14 insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Illumina, Inc. (NASDAQ:ILMN). These stocks are Medivation Inc (NASDAQ:MDVN), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Seattle Genetics, Inc. (NASDAQ:SGEN), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX). This group of stocks are the members of the biotechnology industry and their market caps resemble ILMN’s market cap.

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