We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Biogen Inc. (NASDAQ:BIIB) and determine whether the smart money was really smart about this stock.
Biogen Inc. (NASDAQ:BIIB) was in 70 hedge funds’ portfolios at the end of the first quarter of 2020. BIIB has experienced an increase in hedge fund interest in recent months. There were 61 hedge funds in our database with BIIB positions at the end of the previous quarter. Our calculations also showed that BIIB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action surrounding Biogen Inc. (NASDAQ:BIIB).
How are hedge funds trading Biogen Inc. (NASDAQ:BIIB)?
At the end of the first quarter, a total of 70 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BIIB over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Biogen Inc. (NASDAQ:BIIB), which was worth $1415.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $661.5 million worth of shares. Arrowstreet Capital, Berkshire Hathaway, and Sarissa Capital Management 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 Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 25.95% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 6.89 percent of its 13F equity portfolio to BIIB.
Now, some big names have been driving this bullishness. Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, established the most valuable position in Biogen Inc. (NASDAQ:BIIB). Rock Springs Capital Management had $56.9 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $48.6 million position during the quarter. The other funds with brand new BIIB positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Arthur B Cohen and Joseph Healey’s Healthcor Management LP, and Michael Castor’s Sio Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Biogen Inc. (NASDAQ:BIIB) but similarly valued. We will take a look at The Blackstone Group Inc. (NYSE:BX), ServiceNow Inc (NYSE:NOW), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Equinix Inc (NASDAQ:EQIX). This group of stocks’ market valuations match BIIB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.75 hedge funds with bullish positions and the average amount invested in these stocks was $2074 million. That figure was $4498 million in BIIB’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 42 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. 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 13.3% in 2020 through June 25th but beat the market by 16.8 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 -17% 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.
Disclosure: None. This article was originally published at Insider Monkey.