Neurocrine Biosciences, Inc. (NBIX) Fell Out Of Favor With Hedge Funds

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Neurocrine Biosciences, Inc. (NASDAQ:NBIX).

Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has seen a decrease in enthusiasm from smart money of late. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. There were 32 hedge funds in our database with NBIX positions at the end of the second quarter. Our calculations also showed that NBIX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a glance at the recent hedge fund action encompassing Neurocrine Biosciences, Inc. (NASDAQ:NBIX).

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

Do Hedge Funds Think NBIX Is A Good Stock To Buy Now?

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NBIX over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Neurocrine Biosciences, Inc. (NASDAQ:NBIX) was held by Renaissance Technologies, which reported holding $130.1 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $114.3 million position. Other investors bullish on the company included Deerfield Management, Rock Springs Capital Management, and Partner Fund Management. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Neurocrine Biosciences, Inc. (NASDAQ:NBIX), around 5.23% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, setting aside 2.44 percent of its 13F equity portfolio to NBIX.

Seeing as Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Franklin Parlamis’s Aequim Alternative Investments cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $10.1 million in call options. Efrem Kamen’s fund, Pura Vida Investments, also dropped its call options, about $4.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Neurocrine Biosciences, Inc. (NASDAQ:NBIX). We will take a look at Sunrun Inc (NASDAQ:RUN), Ascendis Pharma A/S (NASDAQ:ASND), Globe Life Inc. (NYSE:GL), Syneos Health, Inc. (NASDAQ:SYNH), Reliance Steel & Aluminum Co. (NYSE:RS), GXO Logistics Inc. (NYSE:GXO), and Crocs, Inc. (NASDAQ:CROX). This group of stocks’ market valuations are similar to NBIX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RUN 37 1677910 -8
ASND 23 2827508 -6
GL 27 775771 -1
SYNH 33 474708 0
RS 24 346919 -3
GXO 27 1313274 27
CROX 37 1051423 -3
Average 29.7 1209645 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $1210 million. That figure was $981 million in NBIX’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Ascendis Pharma A/S (NASDAQ:ASND) is the least popular one with only 23 bullish hedge fund positions. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NBIX is 53.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately NBIX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NBIX were disappointed as the stock returned -13.2% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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