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These Hedge Funds Cashed Out Of Amarin Corporation plc (AMRN) Too Early

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Amarin Corporation plc (NASDAQ:AMRN).

Amarin Corporation plc (NASDAQ:AMRN) investors should be aware of a decrease in hedge fund interest in recent months. Our calculations also showed that AMRN 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

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 take a gander at the key hedge fund action encompassing Amarin Corporation plc (NASDAQ:AMRN).

How have hedgies been trading Amarin Corporation plc (NASDAQ:AMRN)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in AMRN a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

AMRN_dec2019

Among these funds, Baker Bros. Advisors held the most valuable stake in Amarin Corporation plc (NASDAQ:AMRN), which was worth $629.8 million at the end of the third quarter. On the second spot was venBio Select Advisor which amassed $129.2 million worth of shares. Perceptive Advisors, Consonance Capital Management, and Rock Springs Capital Management 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 Consonance Capital Management allocated the biggest weight to Amarin Corporation plc (NASDAQ:AMRN), around 9.59% of its portfolio. Eversept Partners is also relatively very bullish on the stock, designating 6.29 percent of its 13F equity portfolio to AMRN.

Since Amarin Corporation plc (NASDAQ:AMRN) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who were dropping their entire stakes heading into Q4. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $85.6 million in stock, and Arthur B Cohen and Joseph Healey’s Healthcor Management was right behind this move, as the fund cut about $59.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Amarin Corporation plc (NASDAQ:AMRN). These stocks are Grupo Aeroportuario del Pacifico, S.A.B. de C.V. (NYSE:PAC), L Brands Inc (NYSE:LB), Tripadvisor Inc (NASDAQ:TRIP), and Flex Ltd. (NASDAQ:FLEX). This group of stocks’ market caps resemble AMRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PAC 3 93322 -1
LB 36 542095 6
TRIP 29 1050535 3
FLEX 31 1478106 -3
Average 24.75 791015 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $791 million. That figure was $1393 million in AMRN’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 3 bullish hedge fund positions. Amarin Corporation plc (NASDAQ:AMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AMRN as the stock returned 40.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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