Hedge Funds Are Nibbling On Incyte Corporation (INCY)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Incyte Corporation (NASDAQ:INCY).

Incyte Corporation (NASDAQ:INCY) investors should be aware of an increase in hedge fund sentiment of late. Incyte Corporation (NASDAQ:INCY) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistic is 53. Our calculations also showed that INCY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s view the new hedge fund action surrounding Incyte Corporation (NASDAQ:INCY).

Do Hedge Funds Think INCY Is A Good Stock To Buy Now?

At second quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INCY over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is INCY A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Julian Baker and Felix Baker’s Baker Bros. Advisors has the largest position in Incyte Corporation (NASDAQ:INCY), worth close to $2.694 billion, accounting for 11.8% of its total 13F portfolio. On Baker Bros. Advisors’s heels is Renaissance Technologies, which holds a $379.9 million position; 0.5% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism encompass Catherine D. Wood’s ARK Investment Management, Steven Boyd’s Armistice Capital and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Baker Bros. Advisors allocated the biggest weight to Incyte Corporation (NASDAQ:INCY), around 11.83% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, setting aside 1.45 percent of its 13F equity portfolio to INCY.

Consequently, key money managers have been driving this bullishness. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, initiated the largest call position in Incyte Corporation (NASDAQ:INCY). Healthcor Management LP had $22.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $17.1 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Michael Gelband’s ExodusPoint Capital, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Incyte Corporation (NASDAQ:INCY) but similarly valued. These stocks are Ally Financial Inc (NYSE:ALLY), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Tyler Technologies, Inc. (NYSE:TYL), Catalent Inc (NYSE:CTLT), Pool Corporation (NASDAQ:POOL), PagSeguro Digital Ltd. (NYSE:PAGS), and Genuine Parts Company (NYSE:GPC). All of these stocks’ market caps are closest to INCY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALLY 54 2432402 3
SSNC 49 2568906 -5
TYL 33 731035 5
CTLT 40 870986 11
POOL 40 1025705 -1
PAGS 40 2390344 7
GPC 29 418026 3
Average 40.7 1491058 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.7 hedge funds with bullish positions and the average amount invested in these stocks was $1491 million. That figure was $3644 million in INCY’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Genuine Parts Company (NYSE:GPC) is the least popular one with only 29 bullish hedge fund positions. Incyte Corporation (NASDAQ:INCY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INCY is 36.2. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and surpassed the market again by 4.4 percentage points. Unfortunately INCY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); INCY investors were disappointed as the stock returned -23% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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