Not Much Chemistry Between Sanofi (SNY) and Hedge Funds

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Sanofi (NASDAQ:SNY). Sanofi is one of the largest pharmaceutical companies in the world. Sanofi is a top 10 holding in Invesco BLDRS Europe Select ADR Index Fund (NASDAQ:ADRU) and AdvisorShares DoubleLine Value Equity ETF (NYSE:DBLV) which are both small ETFs.

Sanofi (NASDAQ:SNY) shareholders have witnessed an increase in enthusiasm from smart money lately. Our calculations also showed that SNY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Kamran Moghtaderi of Eversept Partners

Kamran Moghtaderi of Eversept Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action regarding Sanofi (NASDAQ:SNY).

Hedge fund activity in Sanofi (NASDAQ:SNY)

Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SNY over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, Fisher Asset Management held the most valuable stake in Sanofi (NASDAQ:SNY), which was worth $805.1 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $46.3 million worth of shares. Balyasny Asset Management, Elliott Management, and Eversept Partners 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 Circle Road Advisors allocated the biggest weight to Sanofi (NASDAQ:SNY), around 8.09% of its portfolio. Eversept Partners is also relatively very bullish on the stock, dishing out 3.47 percent of its 13F equity portfolio to SNY.

As aggregate interest increased, some big names have jumped into Sanofi (NASDAQ:SNY) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Sanofi (NASDAQ:SNY). Citadel Investment Group had $8.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $7 million position during the quarter. The other funds with brand new SNY positions are Brandon Haley’s Holocene Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks similar to Sanofi (NASDAQ:SNY). These stocks are Union Pacific Corporation (NYSE:UNP), NextEra Energy, Inc. (NYSE:NEE), AbbVie Inc (NYSE:ABBV), and Lockheed Martin Corporation (NYSE:LMT). This group of stocks’ market valuations are closest to SNY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNP 62 5197745 -2
NEE 41 1505214 1
ABBV 61 4434502 6
LMT 46 1782982 -2
Average 52.5 3230111 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.5 hedge funds with bullish positions and the average amount invested in these stocks was $3230 million. That figure was $985 million in SNY’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand NextEra Energy, Inc. (NYSE:NEE) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks Sanofi (NASDAQ:SNY) is even less popular than NEE. Hedge funds dodged a bullet by taking a bearish stance towards SNY. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SNY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SNY investors were disappointed as the stock returned 0.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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