Did Hedge Funds Drop The Ball On Horizon Therapeutics Public Limited Company (HZNP) ?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) makes for a good investment right now.

Is Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) a healthy stock for your portfolio? Money managers are getting less bullish. The number of bullish hedge fund positions dropped by 7 lately. Our calculations also showed that HZNP isn’t among the 30 most popular stocks among hedge funds (view the video below). HZNP was in 34 hedge funds’ portfolios at the end of the second quarter of 2019. There were 41 hedge funds in our database with HZNP positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 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.


Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the new hedge fund action regarding Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

Hedge fund activity in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP)

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in HZNP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Jeremy Mindich - Scopia Capital

Among these funds, Renaissance Technologies held the most valuable stake in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), which was worth $210.6 million at the end of the second quarter. On the second spot was Paulson & Co which amassed $160.5 million worth of shares. Moreover, Deerfield Management, D E Shaw, and Scopia Capital were also bullish on Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), allocating a large percentage of their portfolios to this stock.

Since Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) has witnessed bearish sentiment from the smart money, we can see that there is a sect of money managers who sold off their positions entirely last quarter. Intriguingly, David Costen Haley’s HBK Investments sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $11.1 million in stock, and Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors was right behind this move, as the fund dropped about $5.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). We will take a look at Air Lease Corp (NYSE:AL), Life Storage, Inc. (NYSE:LSI), PacWest Bancorp (NASDAQ:PACW), and Selective Insurance Group, Inc. (NASDAQ:SIGI). All of these stocks’ market caps are closest to HZNP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AL 18 320553 -5
LSI 20 349068 5
PACW 20 223740 -1
SIGI 14 43688 2
Average 18 234262 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $1222 million in HZNP’s case. Life Storage, Inc. (NYSE:LSI) is the most popular stock in this table. On the other hand Selective Insurance Group, Inc. (NASDAQ:SIGI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on HZNP as the stock returned 13.2% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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