Is Biogen (BIIB) A Smart Investment Choice?

ClearBridge Investments, an investment management firm, published its “Aggressive Growth Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Aggressive Growth Strategy underperformed its Russell 3000 Growth Index benchmark in the second quarter. On an absolute basis, the Strategy generated gains across the eight sectors in which it was invested (out of 11 sectors total), with the information technology (IT) and communication services sectors the primary contributors. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Biogen Inc. (NASDAQ: BIIB), and discussed its stance on the firm. Biogen Inc. is aCambridge, Massachusetts-based biotechnology company, that currently has a $53.7 billion market capitalization. BIIB delivered a 45.55% return since the beginning of the year, while its 12-month revenues are up by 25.95%. The stock closed at $351.92 per share on July 13, 2021.

Here is what ClearBridge Investments has to say about Biogen Inc. in its Q2 2021 investor letter:

Biogen, which we purchased as a single drug, clinical stage biotech in 1991, saw its long-term investment in research and development pay off again in June with FDA approval of experimental Alzheimer’s treatment Aduhelm. Aduhelm became the first drug approved for Alzheimer’s in 20 years and the first approved to treat the underlying pathophysiology of the disease. We believe the rerating of Biogen shares following the decision validates the potential of innovation in the biopharmaceutical industry to be monetized.

The approval of Aduhelm should be broadly supportive of biotechnology and pharmaceutical stocks as it signals the agency’s willingness to be flexible and set new precedents to make drugs available to patients in therapeutic areas where the unmet need is significant. And it confirms our confidence that scientific breakthroughs in the industry can support long-term growth. That said, we also see opportunity among other types of disruptive health care companies, such as tools, labs, diagnostics and other related health care services companies.”

Based on our calculations, Biogen Inc. (NASDAQ: BIIB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Biogen Inc. was in 63 hedge fund portfolios at the end of the first quarter of 2021. BIIB delivered a 34.27% return in the past 3 months.

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

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