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Elanco Animal Health Incorporated (ELAN): Hedge Funds Are Nibbling

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Elanco Animal Health Incorporated (NYSE:ELAN).

Is Elanco Animal Health Incorporated (NYSE:ELAN) a good stock to buy now? Investors who are in the know are buying. The number of long hedge fund positions inched up by 3 lately. Our calculations also showed that ELAN 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.

In the financial world there are a multitude of indicators stock market investors use to evaluate their holdings. A couple of the best indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat the market by a solid amount (see the details here).

YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the new hedge fund action surrounding Elanco Animal Health Incorporated (NYSE:ELAN).

What have hedge funds been doing with Elanco Animal Health Incorporated (NYSE:ELAN)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in ELAN a year ago. 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, D E Shaw was the largest shareholder of Elanco Animal Health Incorporated (NYSE:ELAN), with a stake worth $71.2 million reported as of the end of September. Trailing D E Shaw was Sirios Capital Management, which amassed a stake valued at $45.8 million. Alyeska Investment Group, Crescent Park Management, and York 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 Crescent Park Management allocated the biggest weight to Elanco Animal Health Incorporated (NYSE:ELAN), around 10.19% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, setting aside 4.05 percent of its 13F equity portfolio to ELAN.

As aggregate interest increased, key hedge funds have been driving this bullishness. York Capital Management, managed by James Dinan, assembled the biggest position in Elanco Animal Health Incorporated (NYSE:ELAN). York Capital Management had $28.9 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $11.1 million position during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Alec Litowitz and Ross Laser’s Magnetar Capital, and Renaissance Technologies.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Elanco Animal Health Incorporated (NYSE:ELAN) but similarly valued. These stocks are NICE Ltd (NASDAQ:NICE), Gartner Inc (NYSE:IT), Pinterest, Inc. (NYSE:PINS), and GDS Holdings Limited (NASDAQ:GDS). This group of stocks’ market values match ELAN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NICE 22 373814 3
IT 32 973145 6
PINS 38 410292 1
GDS 41 1618404 7
Average 33.25 843914 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $844 million. That figure was $341 million in ELAN’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand NICE Ltd (NASDAQ:NICE) is the least popular one with only 22 bullish hedge fund positions. Elanco Animal Health Incorporated (NYSE:ELAN) 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. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately ELAN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ELAN investors were disappointed as the stock returned -4.4% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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