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Were Hedge Funds Right About Amgen, Inc. (AMGN)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Keeping this in mind, let’s take a look at whether Amgen, Inc. (NASDAQ:AMGN) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Amgen, Inc. (NASDAQ:AMGN) investors should pay attention to an increase in hedge fund interest lately. Our calculations also showed that AMGN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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. Now let’s go over the recent hedge fund action encompassing Amgen, Inc. (NASDAQ:AMGN).

What does smart money think about Amgen, Inc. (NASDAQ:AMGN)?

At Q4’s end, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMGN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Amgen, Inc. (NASDAQ:AMGN), which was worth $761.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $331.2 million worth of shares. Pzena Investment Management, GLG Partners, and Alkeon 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 Valueworks LLC allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 5.1% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, designating 3.2 percent of its 13F equity portfolio to AMGN.

As one would reasonably expect, some big names have jumped into Amgen, Inc. (NASDAQ:AMGN) headfirst. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, created the most valuable position in Amgen, Inc. (NASDAQ:AMGN). Woodline Partners had $29.9 million invested in the company at the end of the quarter. Krishen Sud’s Sivik Global Healthcare also made a $6 million investment in the stock during the quarter. The other funds with new positions in the stock are Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Nathan Przybylo’s L2 Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks similar to Amgen, Inc. (NASDAQ:AMGN). We will take a look at TOTAL S.A. (NYSE:TOT), Netflix, Inc. (NASDAQ:NFLX), BHP Group (NYSE:BHP), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps are closest to AMGN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TOT 17 1195776 -1
NFLX 114 13080883 11
BHP 20 886421 -4
NVO 23 2935902 2
Average 43.5 4524746 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.5 hedge funds with bullish positions and the average amount invested in these stocks was $4525 million. That figure was $2290 million in AMGN’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 17 bullish hedge fund positions. Amgen, Inc. (NASDAQ:AMGN) is not the most popular stock in this group but hedge fund interest is still above average. 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on AMGN, though not to the same extent, as the stock returned -1.2% during the first four months of 2020 (through April 20th) 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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