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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Amgen, Inc. (NASDAQ:AMGN).
Is AMGN a good stock to buy now? The best stock pickers were getting less optimistic. The number of long hedge fund positions dropped by 6 lately. Amgen, Inc. (NASDAQ:AMGN) was in 45 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 73. Our calculations also showed that AMGN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 51 hedge funds in our database with AMGN holdings at the end of June.
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 66 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.
James Dondero of Highland Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a peek at the fresh hedge fund action encompassing Amgen, Inc. (NASDAQ:AMGN).
Do Hedge Funds Think AMGN Is A Good Stock To Buy Now?
At Q3's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMGN over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Amgen, Inc. (NASDAQ:AMGN), which was worth $300.1 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $157.9 million worth of shares. Renaissance Technologies, Citadel Investment Group, and Pzena Investment Management 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 Valueworks LLC allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 3.13% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, dishing out 2.75 percent of its 13F equity portfolio to AMGN.
Due to the fact that Amgen, Inc. (NASDAQ:AMGN) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their positions entirely last quarter. It's worth mentioning that Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management dumped the biggest position of the 750 funds followed by Insider Monkey, valued at about $29.7 million in stock, and Ryan Caldwell's Chiron Investment Management was right behind this move, as the fund dumped about $9.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Amgen, Inc. (NASDAQ:AMGN) but similarly valued. These stocks are Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), United Parcel Service, Inc. (NYSE:UPS), T-Mobile US, Inc. (NASDAQ:TMUS), Accenture Plc (NYSE:ACN), AstraZeneca plc (NASDAQ:AZN), and Eli Lilly and Company (NYSE:LLY). This group of stocks' market caps match AMGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVGO,59,2374856,0 XOM,52,1380236,-1 UPS,57,1731232,20 TMUS,94,7538763,-19 ACN,46,1148986,2 AZN,33,2259713,-5 LLY,60,2529803,9 Average,57.3,2709084,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.3 hedge funds with bullish positions and the average amount invested in these stocks was $2709 million. That figure was $1221 million in AMGN's case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand AstraZeneca plc (NASDAQ:AZN) is the least popular one with only 33 bullish hedge fund positions. Amgen, Inc. (NASDAQ:AMGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AMGN is 27.3. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately AMGN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AMGN investors were disappointed as the stock returned -9.3% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.