Here is What Hedge Funds Really Think About Allergan plc (AGN)

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Allergan plc (NYSE:AGN) from the perspective of those elite funds.

Allergan plc (NYSE:AGN) investors should be aware of a decrease in hedge fund interest of late. AGN was in 61 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 62 hedge funds in our database with AGN holdings at the end of the previous quarter. Our calculations also showed that AGN isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

01 Mason Hawkins, Southeastern Asset Management

We’re going to view the key hedge fund action encompassing Allergan plc (NYSE:AGN).

How have hedgies been trading Allergan plc (NYSE:AGN)?

Heading into the first quarter of 2019, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AGN over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).


More specifically, Baupost Group was the largest shareholder of Allergan plc (NYSE:AGN), with a stake worth $635.6 million reported as of the end of September. Trailing Baupost Group was King Street Capital, which amassed a stake valued at $320.8 million. Southeastern Asset Management, Renaissance Technologies, and Paulson & Co were also very fond of the stock, giving the stock large weights in their portfolios.

Since Allergan plc (NYSE:AGN) has witnessed bearish sentiment from the smart money, logic holds that there lies a certain “tier” of funds who sold off their entire stakes in the third quarter. It’s worth mentioning that Doug Silverman and Alexander Klabin’s Senator Investment Group dumped the biggest position of the 700 funds watched by Insider Monkey, totaling an estimated $247.6 million in stock. Christopher James’s fund, Partner Fund Management, also cut its stock, about $131.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Allergan plc (NYSE:AGN). These stocks are Crown Castle International Corp. (REIT) (NYSE:CCI), Celgene Corporation (NASDAQ:CELG), Suncor Energy Inc. (NYSE:SU), and Illumina, Inc. (NASDAQ:ILMN). This group of stocks’ market values resemble AGN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCI 34 2074129 2
CELG 58 4057617 2
SU 30 1054553 -6
ILMN 44 1090583 -1
Average 41.5 2069221 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $2069 million. That figure was $3404 million in AGN’s case. Celgene Corporation (NASDAQ:CELG) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Allergan plc (NYSE:AGN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on AGN, though not to the same extent, as the stock returned 13.8% and outperformed the market as well.

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