Is Illumina, Inc. (ILMN) A Good Stock To Buy?

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Illumina, Inc. (NASDAQ:ILMN).

Illumina, Inc. (NASDAQ:ILMN) investors should pay attention to a slight decrease in hedge fund sentiment of late. ILMN was in 62 hedge funds’ portfolios at the end of September. There were 64 hedge funds in our database with ILMN holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Archer Daniels Midland Company (NYSE:ADM), Cardinal Health, Inc. (NYSE:CAH), and Southwest Airlines Co. (NYSE:LUV) to gather more data points.

To the average investor, there are several methods investors have at their disposal to grade publicly traded companies. Two of the most under-the-radar methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outpace their index-focused peers by a healthy amount (see the details here).

With all of this in mind, let’s analyze the fresh action encompassing Illumina, Inc. (NASDAQ:ILMN).

How are hedge funds trading Illumina, Inc. (NASDAQ:ILMN)?

Heading into Q4, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Lone Pine Capital, managed by Stephen Mandel, holds the largest position in Illumina, Inc. (NASDAQ:ILMN). Lone Pine Capital has a $634.7 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Andreas Halvorsen’s Viking Global, with a $314.6 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Samuel Isaly’s OrbiMed Advisors, John Griffin’s Blue Ridge Capital and David Goel and Paul Ferri’s Matrix Capital Management.

Since Illumina, Inc. (NASDAQ:ILMN) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Christopher James’s Partner Fund Management dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $53.2 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $46.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Illumina, Inc. (NASDAQ:ILMN). We will take a look at Archer Daniels Midland Company (NYSE:ADM), Cardinal Health, Inc. (NYSE:CAH), Southwest Airlines Co. (NYSE:LUV), and AFLAC Incorporated (NYSE:AFL). All of these stocks’ market caps match ILMN’s market cap.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1.23 billion. That figure was $2.25 billion in ILMN’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table, while AFLAC Incorporated (NYSE:AFL) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks, Illumina, Inc. (NASDAQ:ILMN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.