Were Hedge Funds Right About Piling Into Vertex Pharmaceuticals Incorporated (VRTX)?

After several tireless days we have finished crunching the numbers from nearly 900 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 March 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 Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) was in 68 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 56. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. VRTX investors should pay attention to an increase in hedge fund sentiment in recent months. There were 53 hedge funds in our database with VRTX holdings at the end of December. Our calculations also showed that VRTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Cathie Wood ARK Investment Management

Cathie Wood of ARK Investment Management

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

At the end of March, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VRTX over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), which was worth $515.8 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $369.4 million worth of shares. ARK Investment Management, Avoro Capital Advisors (venBio Select Advisor), and OrbiMed Advisors 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 Copernicus Capital Management allocated the biggest weight to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), around 10.42% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, dishing out 6.75 percent of its 13F equity portfolio to VRTX.

As aggregate interest increased, specific money managers have jumped into Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) headfirst. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, established the most outsized position in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Avoro Capital Advisors (venBio Select Advisor) had $300.8 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also initiated a $84.2 million position during the quarter. The following funds were also among the new VRTX investors: Michael Rockefeller and KarláKroeker’s Woodline Partners, Arthur B Cohen and Joseph Healey’s Healthcor Management LP, and Anand Parekh’s Alyeska Investment Group.

Let’s now review hedge fund activity in other stocks similar to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). These stocks are NXP Semiconductors NV (NASDAQ:NXPI), Prudential Public Limited Company (NYSE:PUK), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), Stellantis N.V. (NYSE:STLA), ICICI Bank Limited (NYSE:IBN), UBS Group AG (NYSE:UBS), and Eaton Corporation plc (NYSE:ETN). All of these stocks’ market caps are closest to VRTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NXPI 53 1718673 -13
PUK 2 4640 0
PBR 27 878461 3
STLA 21 751799 6
IBN 31 1903240 2
UBS 16 342177 -2
ETN 49 1094688 8
Average 28.4 956240 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $956 million. That figure was $3712 million in VRTX’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is more popular among hedge funds. Our overall hedge fund sentiment score for VRTX is 90. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately VRTX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRTX were disappointed as the stock returned -6.6% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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