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Were Hedge Funds Right About Warming Up To Mylan Inc. (MYL) Again?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtMylan Inc. (NASDAQ:MYL) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Mylan Inc. (NASDAQ:MYL) has seen an increase in hedge fund interest of late. Our calculations also showed that MYL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the fresh hedge fund action surrounding Mylan Inc. (NASDAQ:MYL).

Hedge fund activity in Mylan Inc. (NASDAQ:MYL)

At the end of the first quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MYL over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mylan Inc. (NASDAQ:MYL) was held by Pzena Investment Management, which reported holding $291.5 million worth of stock at the end of September. It was followed by Deerfield Management with a $181.2 million position. Other investors bullish on the company included Paulson & Co, AQR Capital Management, and Slate Path Capital. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to Mylan Inc. (NASDAQ:MYL), around 12.33% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, dishing out 11.45 percent of its 13F equity portfolio to MYL.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Slate Path Capital, managed by David Greenspan, established the most valuable position in Mylan Inc. (NASDAQ:MYL). Slate Path Capital had $160.8 million invested in the company at the end of the quarter. David Cohen and Harold Levy’s Iridian Asset Management also made a $37.6 million investment in the stock during the quarter. The following funds were also among the new MYL investors: James Morrow’s Callodine Capital Management, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Louis Bacon’s Moore Global Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mylan Inc. (NASDAQ:MYL) but similarly valued. These stocks are InterContinental Hotels Group PLC (NYSE:IHG), Brookfield Property Partners LP (NASDAQ:BPY), Bilibili Inc. (NASDAQ:BILI), and United Rentals, Inc. (NYSE:URI). This group of stocks’ market caps match MYL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IHG 4 9968 -2
BPY 7 42640 -1
BILI 24 731095 1
URI 43 752405 -11
Average 19.5 384027 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $1470 million in MYL’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Mylan Inc. (NASDAQ:MYL) 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately MYL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MYL were disappointed as the stock returned 7.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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