Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)? The smart money sentiment can provide an answer to this question.
Is ALXN a good stock to buy now? Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) was in 58 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 57. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ALXN has experienced an increase in enthusiasm from smart money lately. There were 57 hedge funds in our database with ALXN holdings at the end of June. Our calculations also showed that ALXN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the recent hedge fund action encompassing Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).
How have hedgies been trading Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)?
At Q3’s end, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. By comparison, 48 hedge funds held shares or bullish call options in ALXN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Baker Bros. Advisors held the most valuable stake in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), which was worth $1002.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $544.4 million worth of shares. OrbiMed Advisors, AQR Capital Management, and Iridian Asset 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 Sarissa Capital Management allocated the biggest weight to Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), around 10.75% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, designating 7.85 percent of its 13F equity portfolio to ALXN.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Bridger Management, managed by Roberto Mignone, assembled the largest position in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). Bridger Management had $43.3 million invested in the company at the end of the quarter. Bernard Horn’s Polaris Capital Management also made a $39.1 million investment in the stock during the quarter. The other funds with brand new ALXN positions are Greg Martinez’s Parkman Healthcare Partners, Benjamin A. Smith’s Laurion Capital Management, and David M. Knott’s Dorset Management.
Let’s also examine hedge fund activity in other stocks similar to Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). We will take a look at Pinterest, Inc. (NYSE:PINS), ResMed Inc. (NYSE:RMD), Tencent Music Entertainment Group (NYSE:TME), Aptiv PLC (NYSE:APTV), Fiat Chrysler Automobiles NV (NYSE:FCAU), Corning Incorporated (NYSE:GLW), and Copart, Inc. (NASDAQ:CPRT). All of these stocks’ market caps are similar to ALXN’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 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $1041 million. That figure was $3776 million in ALXN’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Fiat Chrysler Automobiles NV (NYSE:FCAU) is the least popular one with only 20 bullish hedge fund positions. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ALXN is 67.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately ALXN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALXN were disappointed as the stock returned 7.3% since the end of September (through 12/2) 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.