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Were Hedge Funds Right About Biogen Inc. (BIIB)?

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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Biogen Inc. (NASDAQ:BIIB)?

Is Biogen Inc. (NASDAQ:BIIB) a bargain? The best stock pickers are betting on the stock. The number of bullish hedge fund bets advanced by 8 in recent months. Our calculations also showed that BIIB 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). BIIB was in 61 hedge funds’ portfolios at the end of December. There were 53 hedge funds in our database with BIIB holdings at the end of the previous quarter.

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 S&P 500 ETFs by 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 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.

Warren Buffett

Warren Buffett of Berkshire Hathaway

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. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Biogen Inc. (NASDAQ:BIIB).

Hedge fund activity in Biogen Inc. (NASDAQ:BIIB)

At Q4’s end, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in BIIB over the last 18 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in Biogen Inc. (NASDAQ:BIIB) was held by Renaissance Technologies, which reported holding $1356 million worth of stock at the end of September. It was followed by AQR Capital Management with a $781 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 15.84% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 5.28 percent of its 13F equity portfolio to BIIB.

As one would reasonably expect, key hedge funds have jumped into Biogen Inc. (NASDAQ:BIIB) headfirst. Berkshire Hathaway, managed by Warren Buffett, assembled the most valuable position in Biogen Inc. (NASDAQ:BIIB). Berkshire Hathaway had $192.4 million invested in the company at the end of the quarter. Jeremy Green’s Redmile Group also made a $135.8 million investment in the stock during the quarter. The following funds were also among the new BIIB investors: Brandon Haley’s Holocene Advisors, Christopher James’s Partner Fund Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s go over hedge fund activity in other stocks similar to Biogen Inc. (NASDAQ:BIIB). These stocks are Advanced Micro Devices, Inc. (NASDAQ:AMD), ServiceNow Inc (NYSE:NOW), General Motors Company (NYSE:GM), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market valuations resemble BIIB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMD 53 1462695 -6
NOW 75 5035036 -17
GM 75 6531524 -1
LVS 37 1256467 -5
Average 60 3571431 -7.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 60 hedge funds with bullish positions and the average amount invested in these stocks was $3571 million. That figure was $5163 million in BIIB’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Las Vegas Sands Corp. (NYSE:LVS) is the least popular one with only 37 bullish hedge fund positions. Biogen Inc. (NASDAQ:BIIB) 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 BIIB as the stock returned 14.4% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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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