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Hedge Funds Started Snapping Up Amgen, Inc. (AMGN) Too Early

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Amgen, Inc. (NASDAQ:AMGN).

Amgen, Inc. (NASDAQ:AMGN) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that AMGN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s check out the recent hedge fund action surrounding Amgen, Inc. (NASDAQ:AMGN).

Hedge fund activity in Amgen, Inc. (NASDAQ:AMGN)

At Q4’s end, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMGN over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Amgen, Inc. (NASDAQ:AMGN), with a stake worth $761.7 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $331.2 million. Pzena Investment Management, GLG Partners, and Alkeon 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 Valueworks LLC allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 5.1% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, designating 3.2 percent of its 13F equity portfolio to AMGN.

As one would reasonably expect, specific money managers have jumped into Amgen, Inc. (NASDAQ:AMGN) headfirst. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, initiated the most outsized position in Amgen, Inc. (NASDAQ:AMGN). Woodline Partners had $29.9 million invested in the company at the end of the quarter. Krishen Sud’s Sivik Global Healthcare also made a $6 million investment in the stock during the quarter. The following funds were also among the new AMGN investors: Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Nathan Przybylo’s L2 Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Amgen, Inc. (NASDAQ:AMGN). We will take a look at TOTAL S.A. (NYSE:TOT), Netflix, Inc. (NASDAQ:NFLX), BHP Group (NYSE:BHP), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps are similar to AMGN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TOT 17 1195776 -1
NFLX 114 13080883 11
BHP 20 886421 -4
NVO 23 2935902 2
Average 43.5 4524746 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.5 hedge funds with bullish positions and the average amount invested in these stocks was $4525 million. That figure was $2290 million in AMGN’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 17 bullish hedge fund positions. Amgen, Inc. (NASDAQ:AMGN) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately AMGN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMGN were disappointed as the stock returned -17.1% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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