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

Asma UL Husna

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Amgen, Inc. (NASDAQ:AMGN) based on that data and determine whether they were really smart about the stock.

Is Amgen, Inc. (NASDAQ:AMGN) going to take off soon? The smart money was getting less bullish. The number of long hedge fund positions shrunk by 6 lately. Our calculations also showed that AMGN 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). AMGN was in 52 hedge funds' portfolios at the end of March. There were 58 hedge funds in our database with AMGN positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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.

[caption id="attachment_315022" align="aligncenter" width="392"] Michael Castor of Sio Capital[/caption]

Michael Castor Sio Capital
Michael Castor Sio Capital

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. With all of this in mind let's take a glance at the fresh hedge fund action regarding Amgen, Inc. (NASDAQ:AMGN).

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

At the end of the first quarter, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in AMGN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Renaissance Technologies has the number one position in Amgen, Inc. (NASDAQ:AMGN), worth close to $760.2 million, amounting to 0.7% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $351.3 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Richard S. Pzena's Pzena Investment Management, D. E. Shaw's D E Shaw and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 7.21% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, designating 3.42 percent of its 13F equity portfolio to AMGN.

Because Amgen, Inc. (NASDAQ:AMGN) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there were a few hedgies that elected to cut their full holdings in the first quarter. Intriguingly, Michael Rockefeller and KarláKroeker's Woodline Partners sold off the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $29.9 million in stock, and Brian Ashford-Russell and Tim Woolley's Polar Capital was right behind this move, as the fund sold off about $22.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds in the first quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Amgen, Inc. (NASDAQ:AMGN) but similarly valued. These stocks are NextEra Energy, Inc. (NYSE:NEE), Wells Fargo & Company (NYSE:WFC), AstraZeneca plc (NYSE:AZN), and HSBC Holdings plc (NYSE:HSBC). This group of stocks' market values are closest to AMGN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEE,52,1436389,6 WFC,76,12935257,-3 AZN,26,1772166,-6 HSBC,14,378656,-4 Average,42,4130617,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $4131 million. That figure was $2057 million in AMGN's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 14 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 but beat the market by 15.5 percentage points. Unfortunately AMGN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AMGN were disappointed as the stock returned 17.1% during the same time period 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 many of these stocks already outperformed the market so far this year.

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

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