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Hedge Funds Slowly Coming Back To Intercept Pharmaceuticals Inc (ICPT)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Intercept Pharmaceuticals Inc (NASDAQ:ICPT) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Intercept Pharmaceuticals Inc (NASDAQ:ICPT) worth your attention right now? Money managers were getting more optimistic. The number of long hedge fund bets inched up by 3 recently. Intercept Pharmaceuticals Inc (NASDAQ:ICPT) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. Our calculations also showed that ICPT 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.

According to most stock holders, hedge funds are perceived as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at present, We look at the aristocrats of this group, about 850 funds. These hedge fund managers orchestrate most of the hedge fund industry’s total capital, and by keeping track of their inimitable investments, Insider Monkey has discovered many investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Alex Denner Sarissa Capital

Alex Denner of Sarissa Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. 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 website to get excerpts of these letters in your inbox. With all of this in mind let’s analyze the latest hedge fund action surrounding Intercept Pharmaceuticals Inc (NASDAQ:ICPT).

What have hedge funds been doing with Intercept Pharmaceuticals Inc (NASDAQ:ICPT)?

At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in ICPT a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Sarissa Capital Management was the largest shareholder of Intercept Pharmaceuticals Inc (NASDAQ:ICPT), with a stake worth $57.5 million reported as of the end of September. Trailing Sarissa Capital Management was Rima Senvest Management, which amassed a stake valued at $41.4 million. Adage Capital Management, Two Sigma Advisors, and Samsara BioCapital 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 Sarissa Capital Management allocated the biggest weight to Intercept Pharmaceuticals Inc (NASDAQ:ICPT), around 6.4% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, dishing out 6.22 percent of its 13F equity portfolio to ICPT.

With a general bullishness amongst the heavyweights, some big names have jumped into Intercept Pharmaceuticals Inc (NASDAQ:ICPT) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the biggest position in Intercept Pharmaceuticals Inc (NASDAQ:ICPT). Adage Capital Management had $26.4 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $6.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Greg Poole’s Echo Street Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intercept Pharmaceuticals Inc (NASDAQ:ICPT) but similarly valued. These stocks are Spirit Airlines Incorporated (NYSE:SAVE), MakeMyTrip Limited (NASDAQ:MMYT), United Community Banks Inc (NASDAQ:UCBI), Ambarella Inc (NASDAQ:AMBA), EverQuote, Inc. (NASDAQ:EVER), 360 DigiTech, Inc. (NASDAQ:QFIN), and Noah Holdings Limited (NYSE:NOAH). This group of stocks’ market valuations are closest to ICPT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAVE 23 98598 -5
MMYT 10 28493 1
UCBI 17 25165 6
AMBA 27 171060 6
EVER 23 271845 0
QFIN 12 64598 9
NOAH 18 335783 4
Average 18.6 142220 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $215 million in ICPT’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 10 bullish hedge fund positions. Intercept Pharmaceuticals Inc (NASDAQ:ICPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ICPT is 67.7. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ICPT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ICPT were disappointed as the stock returned -13.5% in Q3 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.