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Is AMRN A Good Stock To Buy According To Hedge Funds?

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Reymerlyn Martin
·6 min read
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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Amarin Corporation plc (NASDAQ:AMRN) makes for a good investment right now.

Is AMRN a good stock to buy? Amarin Corporation plc (NASDAQ:AMRN) has seen a decrease in enthusiasm from smart money lately. Amarin Corporation plc (NASDAQ:AMRN) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic is 39. There were 32 hedge funds in our database with AMRN positions at the end of the second quarter. Our calculations also showed that AMRN 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).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.
Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

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. Now let's check out the latest hedge fund action regarding Amarin Corporation plc (NASDAQ:AMRN).

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

Heading into the fourth quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in AMRN a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Baker Bros. Advisors held the most valuable stake in Amarin Corporation plc (NASDAQ:AMRN), which was worth $134.8 million at the end of the third quarter. On the second spot was Eversept Partners which amassed $44.9 million worth of shares. D E Shaw, Avoro Capital Advisors (venBio Select Advisor), and Rock Springs Capital 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 Eversept Partners allocated the biggest weight to Amarin Corporation plc (NASDAQ:AMRN), around 10.09% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, dishing out 1.39 percent of its 13F equity portfolio to AMRN.

Because Amarin Corporation plc (NASDAQ:AMRN) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of fund managers who were dropping their positions entirely by the end of the third quarter. Interestingly, Farallon Capital sold off the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising close to $21.6 million in stock, and Bhagwan Jay Rao's Integral Health Asset Management was right behind this move, as the fund dumped about $2.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks similar to Amarin Corporation plc (NASDAQ:AMRN). These stocks are Adient plc (NYSE:ADNT), Celsius Holdings, Inc. (NASDAQ:CELH), Hancock Whitney Corporation (NASDAQ:HWC), Steven Madden, Ltd. (NASDAQ:SHOO), 8x8, Inc. (NYSE:EGHT), United States Steel Corporation (NYSE:X), and Group 1 Automotive, Inc. (NYSE:GPI). All of these stocks' market caps are closest to AMRN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADNT,39,392944,4 CELH,17,65774,7 HWC,23,82566,0 SHOO,23,88372,3 EGHT,22,384327,1 X,21,71985,1 GPI,24,214897,3 Average,24.1,185838,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $299 million in AMRN's case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Celsius Holdings, Inc. (NASDAQ:CELH) is the least popular one with only 17 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 overall hedge fund sentiment score for AMRN is 55.6. 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 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AMRN as the stock returned 18.3% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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