It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) and compare its performance against hedge funds’ favorite stocks.
Is Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) the right investment to pursue these days? Money managers are reducing their bets on the stock. The number of long hedge fund bets were trimmed by 6 in recent months. Our calculations also showed that ALNY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). ALNY was in 29 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with ALNY holdings at the end of the previous quarter.
According to most market participants, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our researchers hone in on the crème de la crème of this group, approximately 750 funds. These investment experts preside over bulk of all hedge funds’ total capital, and by keeping track of their highest performing stock picks, Insider Monkey has formulated several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Lee Ainslie of Maverick Capital
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. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let’s take a gander at the recent hedge fund action regarding Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY).
How have hedgies been trading Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)?
At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALNY over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Maverick Capital was the largest shareholder of Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), with a stake worth $259.2 million reported as of the end of September. Trailing Maverick Capital was Farallon Capital, which amassed a stake valued at $120.6 million. Alkeon Capital Management, 12 West Capital Management, and Slate Path Capital 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 Casdin Capital allocated the biggest weight to Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), around 4.83% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, earmarking 3.81 percent of its 13F equity portfolio to ALNY.
Because Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) has experienced declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that decided to sell off their entire stakes in the third quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $34 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $28.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). These stocks are NICE Ltd. (NASDAQ:NICE), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Teck Resources Ltd (NYSE:TECK), and RPM International Inc. (NYSE:RPM). All of these stocks’ market caps are similar to ALNY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NICE | 16 | 375883 | -3 |
| MLCO | 24 | 533835 | 2 |
| TECK | 17 | 575085 | -6 |
| RPM | 32 | 410079 | 7 |
| Average | 22.25 | 473721 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $780 million in ALNY’s case. RPM International Inc. (NYSE:RPM) is the most popular stock in this table. On the other hand NICE Ltd. (NASDAQ:NICE) is the least popular one with only 16 bullish hedge fund positions. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on ALNY as the stock returned 58% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
