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Were Hedge Funds Right About Alexion Pharmaceuticals (ALXN)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).

Hedge fund interest in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ALXN to other stocks including Entergy Corporation (NYSE:ETR), Kellogg Company (NYSE:K), and Rockwell Automation Inc. (NYSE:ROK) to get a better sense of its popularity.

In the financial world there are tons of gauges investors put to use to size up stocks. A duo of the best gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the broader indices by a healthy amount (see the details here).

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the recent hedge fund action encompassing Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).

Hedge fund activity in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)

At Q4’s end, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALXN over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Julian Baker and Felix Baker’s Baker Bros. Advisors has the largest position in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), worth close to $893.1 million, corresponding to 4.7% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $403.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass Cliff Asness’s AQR Capital Management, David Cohen and Harold Levy’s Iridian Asset Management and Samuel Isaly’s OrbiMed Advisors. In terms of the portfolio weights assigned to each position Partner Fund Management allocated the biggest weight to Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), around 5.55% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, setting aside 5.23 percent of its 13F equity portfolio to ALXN.

Seeing as Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their positions entirely last quarter. Interestingly, Jeremy Green’s Redmile Group cut the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling close to $113.8 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund dumped about $46.6 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). We will take a look at Entergy Corporation (NYSE:ETR), Kellogg Company (NYSE:K), Rockwell Automation Inc. (NYSE:ROK), and Splunk Inc (NASDAQ:SPLK). This group of stocks’ market values are similar to ALXN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETR 31 1402438 2
K 30 569797 1
ROK 39 614212 10
SPLK 38 538860 2
Average 34.5 781327 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $781 million. That figure was $2928 million in ALXN’s case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is more popular among hedge funds. 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 1.3% in 2020 through May 1st but still managed to beat the market by 12.9 percentage points. Hedge funds were also right about betting on ALXN, though not to the same extent, as the stock returned -3.9% in 2020 (through May 1st) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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