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Hedge Funds Are Dumping Amarin Corporation plc (AMRN)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Amarin Corporation plc (NASDAQ:AMRN) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is Amarin Corporation plc (NASDAQ:AMRN) a splendid stock to buy now? The smart money was reducing their bets on the stock. The number of long hedge fund bets fell by 7 in recent months. Amarin Corporation plc (NASDAQ:AMRN) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. Our calculations also showed that AMRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are a large number of indicators stock market investors put to use to appraise publicly traded companies. Some of the best indicators are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform the broader indices by a superb amount (see the details here).

Kamran Moghtaderi of Eversept Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Amarin Corporation plc (NASDAQ:AMRN).

Hedge fund activity in Amarin Corporation plc (NASDAQ:AMRN)

At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMRN over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in Amarin Corporation plc (NASDAQ:AMRN) was held by Baker Bros. Advisors, which reported holding $238.7 million worth of stock at the end of September. It was followed by D E Shaw with a $39.4 million position. Other investors bullish on the company included Eversept Partners, Rock Springs Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to Amarin Corporation plc (NASDAQ:AMRN), around 5.35% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, earmarking 1.77 percent of its 13F equity portfolio to AMRN.

Seeing as Amarin Corporation plc (NASDAQ:AMRN) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies who were dropping their full holdings last quarter. Interestingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP sold off the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $30.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $6.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Amarin Corporation plc (NASDAQ:AMRN) but similarly valued. These stocks are Macquarie Infrastructure Corporation (NYSE:MIC), Itron, Inc. (NASDAQ:ITRI), AllianceBernstein Holding LP (NYSE:AB), Endava plc (NYSE:DAVA), Compania Cervecerias Unidas S.A. (NYSE:CCU), Millicom International Cellular S.A. (NASDAQ:TIGO), and SLM Corp (NASDAQ:SLM). This group of stocks’ market values are closest to AMRN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MIC 38 564202 8
ITRI 13 300874 -6
AB 7 23909 0
DAVA 8 76269 -1
CCU 8 22635 -3
TIGO 8 61613 1
SLM 32 462666 5
Average 16.3 216024 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $477 million in AMRN’s case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 7 bullish hedge fund positions. Amarin Corporation plc (NASDAQ:AMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMRN is 62.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately AMRN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMRN were disappointed as the stock returned -38.3% 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.

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