How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) and determine whether hedge funds had an edge regarding this stock.
Hedge fund interest in AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Maui Land & Pineapple Company, Inc. (NYSE:MLP), HOOKIPA Pharma Inc. (NASDAQ:HOOK), and Jumei International Holding Ltd (NYSE:JMEI) to gather more data points. Our calculations also showed that AMAG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
If you’d ask most shareholders, hedge funds are perceived as underperforming, old investment tools of the past. While there are more than 8000 funds trading at present, We choose to focus on the bigwigs of this group, around 850 funds. These investment experts have their hands on the majority of all hedge funds’ total capital, and by following their matchless investments, Insider Monkey has discovered a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action surrounding AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG).
What have hedge funds been doing with AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG)?
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMAG over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Camber Capital Management held the most valuable stake in AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), which was worth $27.1 million at the end of the third quarter. On the second spot was Armistice Capital which amassed $25.5 million worth of shares. Palo Alto Investors, Renaissance Technologies, and D E Shaw 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 Camber Capital Management allocated the biggest weight to AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), around 1.62% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, dishing out 1.57 percent of its 13F equity portfolio to AMAG.
Due to the fact that AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few hedge funds who were dropping their positions entirely heading into Q4. Intriguingly, Israel Englander’s Millennium Management dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth about $6 million in stock. Xiuping Li’s fund, Opti Capital Management, also sold off its stock, about $3 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG). These stocks are Maui Land & Pineapple Company, Inc. (NYSE:MLP), HOOKIPA Pharma Inc. (NASDAQ:HOOK), Jumei International Holding Ltd (NYSE:JMEI), and Caleres Inc (NYSE:CAL). This group of stocks’ market caps are closest to AMAG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $92 million in AMAG’s case. Caleres Inc (NYSE:CAL) is the most popular stock in this table. On the other hand Maui Land & Pineapple Company, Inc. (NYSE:MLP) is the least popular one with only 1 bullish hedge fund positions. AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on AMAG, though not to the same extent, as the stock returned 23.8% during the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.