Hedge Funds Are Souring On Vertex Pharmaceuticals Incorporated (VRTX)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of more than 867 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) based on those filings.

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) was in 55 hedge funds’ portfolios at the end of September. The all time high for this statistic is 68. VRTX shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 60 hedge funds in our database with VRTX positions at the end of the second quarter. Our calculations also showed that VRTX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s analyze the fresh hedge fund action regarding Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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

At third quarter’s end, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRTX over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Renaissance Technologies has a $343.1 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $311 million position; 0.3% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise Catherine D. Wood’s ARK Investment Management, Noam Gottesman’s GLG Partners and Ian Simm’s Impax Asset Management. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), around 3.59% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, designating 2.1 percent of its 13F equity portfolio to VRTX.

Due to the fact that Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that elected to cut their entire stakes last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, totaling about $65.3 million in stock. Chris Rokos’s fund, Rokos Capital Management, also said goodbye to its stock, about $51.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). We will take a look at Roper Technologies Inc. (NYSE:ROP), Monster Beverage Corp (NASDAQ:MNST), EOG Resources Inc (NYSE:EOG), Palo Alto Networks Inc (NASDAQ:PANW), IHS Markit Ltd. (NYSE:INFO), Global Payments Inc (NYSE:GPN), and IQVIA Holdings, Inc. (NYSE:IQV). This group of stocks’ market caps are similar to VRTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROP 45 1667275 4
MNST 42 2134498 -4
EOG 47 1024547 12
PANW 73 5899838 4
INFO 64 6723219 3
GPN 68 3462603 2
IQV 66 3756655 -3
Average 57.9 3524091 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 57.9 hedge funds with bullish positions and the average amount invested in these stocks was $3524 million. That figure was $2713 million in VRTX’s case. Palo Alto Networks Inc (NASDAQ:PANW) is the most popular stock in this table. On the other hand Monster Beverage Corp (NASDAQ:MNST) is the least popular one with only 42 bullish hedge fund positions. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRTX is 45.2. 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately VRTX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VRTX investors were disappointed as the stock returned 3.1% since the end of September (through 11/30) 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.