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Neurocrine Biosciences (NBIX): Hedge Funds In Wait-and-See Mode

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Neurocrine Biosciences, Inc. (NASDAQ:NBIX) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Neurocrine Biosciences, Inc. (NASDAQ:NBIX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 38 hedge funds’ portfolios at the end of June. Our calculations also showed that NBIX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 Waters Corporation (NYSE:WAT), Varian Medical Systems, Inc. (NYSE:VAR), and Ubiquiti Inc. (NYSE:UI) to gather more data points. Our calculations also showed that NBIX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

According to most investors, hedge funds are perceived as slow, old financial tools of the past. While there are over 8000 funds in operation at present, Our experts choose to focus on the crème de la crème of this club, about 850 funds. These investment experts manage the lion’s share of the hedge fund industry’s total asset base, and by watching their best picks, Insider Monkey has revealed various investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Joseph Edelman of Perceptive Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now we’re going to view the key hedge fund action encompassing Neurocrine Biosciences, Inc. (NASDAQ:NBIX).

How have hedgies been trading Neurocrine Biosciences, Inc. (NASDAQ:NBIX)?

At second quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NBIX over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is NBIX A Good Stock To Buy?

Among these funds, Perceptive Advisors held the most valuable stake in Neurocrine Biosciences, Inc. (NASDAQ:NBIX), which was worth $261.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $181.1 million worth of shares. Rock Springs Capital Management, OrbiMed Advisors, and Baker Bros. Advisors 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 Birchview Capital allocated the biggest weight to Neurocrine Biosciences, Inc. (NASDAQ:NBIX), around 5.75% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 4.57 percent of its 13F equity portfolio to NBIX.

Since Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers who sold off their positions entirely by the end of the second quarter. Intriguingly, Franklin Parlamis’s Aequim Alternative Investments dumped the biggest stake of all the hedgies tracked by Insider Monkey, worth about $30.9 million in stock, and Ian Simm’s Impax Asset Management was right behind this move, as the fund dropped about $6.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Neurocrine Biosciences, Inc. (NASDAQ:NBIX) but similarly valued. We will take a look at Waters Corporation (NYSE:WAT), Varian Medical Systems, Inc. (NYSE:VAR), Ubiquiti Inc. (NYSE:UI), SVB Financial Group (NASDAQ:SIVB), Jacobs Engineering Group Inc. (NYSE:J), UDR, Inc. (NYSE:UDR), and CenturyLink, Inc. (NYSE:CTL). All of these stocks’ market caps are closest to NBIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WAT 38 615214 13
VAR 27 586063 2
UI 29 227931 6
SIVB 26 456322 -4
J 32 1047013 4
UDR 29 389036 10
CTL 30 788387 -4
Average 30.1 587138 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $1196 million in NBIX’s case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand SVB Financial Group (NASDAQ:SIVB) is the least popular one with only 26 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 80.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately NBIX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NBIX were disappointed as the stock returned -4.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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