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Were Hedge Funds Right About Flocking Into Amarin Corporation plc (AMRN) ?

Is Amarin Corporation plc (NASDAQ:AMRN) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Amarin Corporation plc (NASDAQ:AMRN) has experienced an increase in hedge fund sentiment in recent months. Our calculations also showed that AMRN isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.

Samuel Isaly Orbimed Advisors

Let’s view the key hedge fund action regarding Amarin Corporation plc (NASDAQ:AMRN).

What does the smart money think about Amarin Corporation plc (NASDAQ:AMRN)?

At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2018. By comparison, 18 hedge funds held shares or bullish call options in AMRN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AMRN_apr2019

More specifically, Baker Bros. Advisors was the largest shareholder of Amarin Corporation plc (NASDAQ:AMRN), with a stake worth $579.7 million reported as of the end of September. Trailing Baker Bros. Advisors was Consonance Capital Management, which amassed a stake valued at $128.6 million. Point72 Asset Management, Millennium Management, and venBio Select Advisor were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names have jumped into Amarin Corporation plc (NASDAQ:AMRN) headfirst. Element Capital Management, managed by Jeffrey Talpins, assembled the most outsized position in Amarin Corporation plc (NASDAQ:AMRN). Element Capital Management had $6.9 million invested in the company at the end of the quarter. Hal Mintz’s Sabby Capital also made a $1.2 million investment in the stock during the quarter. The other funds with brand new AMRN positions are Samuel Isaly’s OrbiMed Advisors, Phil Frohlich’s Prescott Group Capital Management, and George Zweig, Shane Haas and Ravi Chander’s Signition LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Amarin Corporation plc (NASDAQ:AMRN) but similarly valued. These stocks are Cree, Inc. (NASDAQ:CREE), Empire State Realty Trust Inc (NYSE:ESRT), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), and Genesee & Wyoming Inc (NYSE:GWR). This group of stocks’ market valuations resemble AMRN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CREE 9 226703 -4
ESRT 13 160283 0
KNX 26 299335 -5
GWR 18 322177 7
Average 16.5 252125 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $1243 million in AMRN’s case. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is the most popular stock in this table. On the other hand Cree, Inc. (NASDAQ:CREE) is the least popular one with only 9 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on AMRN as the stock returned 33.4% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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