Was The Smart Money Right About Illumina, Inc. (ILMN)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Illumina, Inc. (NASDAQ:ILMN).

Illumina, Inc. (NASDAQ:ILMN) was in 45 hedge funds’ portfolios at the end of December. The all time high for this statistic is 62. ILMN has experienced an increase in activity from the world’s largest hedge funds lately. There were 44 hedge funds in our database with ILMN positions at the end of the third quarter. Our calculations also showed that ILMN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To most traders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, We hone in on the moguls of this group, approximately 850 funds. These investment experts orchestrate the majority of the smart money’s total capital, and by observing their first-class equity investments, Insider Monkey has identified several investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the new hedge fund action surrounding Illumina, Inc. (NASDAQ:ILMN).

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

At the end of the fourth quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ILMN over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ILMN A Good Stock To Buy?

The largest stake in Illumina, Inc. (NASDAQ:ILMN) was held by Generation Investment Management, which reported holding $726.5 million worth of stock at the end of December. It was followed by GuardCap Asset Management with a $351.5 million position. Other investors bullish on the company included Select Equity Group, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position GuardCap Asset Management allocated the biggest weight to Illumina, Inc. (NASDAQ:ILMN), around 7.17% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 3.24 percent of its 13F equity portfolio to ILMN.

As one would reasonably expect, key money managers were leading the bulls’ herd. Orbis Investment Management, managed by William B. Gray, assembled the most valuable position in Illumina, Inc. (NASDAQ:ILMN). Orbis Investment Management had $29 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $25.6 million position during the quarter. The other funds with new positions in the stock are Steven Boyd’s Armistice Capital, Robert Charles Gibbins’s Autonomy Capital, and Michael Rockefeller and Karl Kroeker’s Woodline Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Illumina, Inc. (NASDAQ:ILMN) but similarly valued. These stocks are Westpac Banking Corporation (NYSE:WBK), Banco Santander, S.A. (NYSE:SAN), DuPont de Nemours Inc (NYSE:DD), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Dollar General Corp. (NYSE:DG), ICICI Bank Limited (NYSE:IBN), and Boston Scientific Corporation (NYSE:BSX). This group of stocks’ market valuations are similar to ILMN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WBK 3 29715 -1
SAN 14 415472 0
DD 60 6277336 -1
REGN 46 1330342 2
DG 57 1677239 1
IBN 29 1080794 5
BSX 58 3632909 -3
Average 38.1 2063401 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $2063 million. That figure was $1748 million in ILMN’s case. DuPont de Nemours Inc (NYSE:DD) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 bullish hedge fund positions. Illumina, Inc. (NASDAQ:ILMN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ILMN is 64.6. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately ILMN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ILMN were disappointed as the stock returned 6.2% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Follow Illumina Inc. (NASDAQ:ILMN)

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