A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 4 percentage points during the first half of the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Horizon Pharma Public Limited Company (NASDAQ:HZNP) during the quarter.
Is Horizon Pharma Public Limited Company (NASDAQ:HZNP) a buy here? The best stock pickers are buying. The number of long hedge fund bets increased by 2 in recent months. Our calculations also showed that HZNP isn’t among the 30 most popular stocks among hedge funds. HZNP was in 21 hedge funds’ portfolios at the end of the third quarter of 2018. There were 19 hedge funds in our database with HZNP positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the latest hedge fund action surrounding Horizon Pharma Public Limited Company (NASDAQ:HZNP).
Hedge fund activity in Horizon Pharma Public Limited Company (NASDAQ:HZNP)
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards HZNP over the last 13 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.
More specifically, Scopia Capital was the largest shareholder of Horizon Pharma Public Limited Company (NASDAQ:HZNP), with a stake worth $289 million reported as of the end of September. Trailing Scopia Capital was Paulson & Co, which amassed a stake valued at $140.4 million. Deerfield Management, Renaissance Technologies, and venBio Select Advisor were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names have jumped into Horizon Pharma Public Limited Company (NASDAQ:HZNP) headfirst. Maverick Capital, managed by Lee Ainslie, established the biggest position in Horizon Pharma Public Limited Company (NASDAQ:HZNP). Maverick Capital had $5.9 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also made a $2.9 million investment in the stock during the quarter. The only other fund with a brand new HZNP position is Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Horizon Pharma Public Limited Company (NASDAQ:HZNP) but similarly valued. These stocks are Myriad Genetics, Inc. (NASDAQ:MYGN), Sodastream International Ltd (NASDAQ:SODA), Verint Systems Inc. (NASDAQ:VRNT), and Array Biopharma Inc (NASDAQ:ARRY). This group of stocks’ market valuations match HZNP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYGN | 21 | 379120 | 4 |
| SODA | 24 | 827744 | 8 |
| VRNT | 18 | 319776 | 0 |
| ARRY | 30 | 816377 | -1 |
| Average | 23.25 | 585754 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $875 million in HZNP’s case. Array Biopharma Inc (NASDAQ:ARRY) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 18 bullish hedge fund positions. Horizon Pharma Public Limited Company (NASDAQ:HZNP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ARRY might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
