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Here is Hedge Funds’ 17th Most Popular Stock Pick

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on Celgene Corporation (NASDAQ:CELG).

Celgene Corporation (NASDAQ:CELG) was in 88 hedge funds’ portfolios at the end of the second quarter of 2019. CELG investors should be aware of a decrease in activity from the world’s largest hedge funds lately. There were 101 hedge funds in our database with CELG positions at the end of the previous quarter. Our calculations also showed that CELG ranks 17th among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

BAUPOST GROUP Seth Klarman

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Celgene Corporation (NASDAQ:CELG).

Hedge fund activity in Celgene Corporation (NASDAQ:CELG)

Heading into the third quarter of 2019, a total of 88 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CELG over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

CELG_oct2019

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the largest position in Celgene Corporation (NASDAQ:CELG), worth close to $1.2362 billion, amounting to 3.1% of its total 13F portfolio. Coming in second is William B. Gray of Orbis Investment Management, with a $873 million position; the fund has 6.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Jim Simons’s Renaissance Technologies, David Abrams’s Abrams Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Due to the fact that Celgene Corporation (NASDAQ:CELG) has faced declining sentiment from the smart money, we can see that there is a sect of hedgies who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Farallon Capital cut the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $795.3 million in stock. Seth Klarman’s fund, Baupost Group, also dumped its stock, about $377.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 13 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to Celgene Corporation (NASDAQ:CELG). These stocks are The Bank of Nova Scotia (NYSE:BNS), Duke Energy Corporation (NYSE:DUK), T-Mobile US, Inc. (NASDAQ:TMUS), and The TJX Companies, Inc. (NYSE:TJX). All of these stocks’ market caps match CELG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BNS 16 536678 2
DUK 32 1626108 6
TMUS 78 2625953 16
TJX 50 2307933 -4
Average 44 1774168 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $1774 million. That figure was $10570 million in CELG’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Celgene Corporation (NASDAQ:CELG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CELG as the stock returned 7.4% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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