Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Biogen Inc. (NASDAQ:BIIB) was in 49 hedge funds' portfolios at the end of the first quarter of 2019. BIIB has experienced a decrease in hedge fund interest lately. There were 57 hedge funds in our database with BIIB holdings at the end of the previous quarter. Our calculations also showed that biib isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to analyze the latest hedge fund action regarding Biogen Inc. (NASDAQ:BIIB).
What does the smart money think about Biogen Inc. (NASDAQ:BIIB)?
At Q1's end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BIIB over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Biogen Inc. (NASDAQ:BIIB) was held by AQR Capital Management, which reported holding $991.8 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $405.8 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Samlyn Capital.
Since Biogen Inc. (NASDAQ:BIIB) has experienced a decline in interest from hedge fund managers, it's safe to say that there is a sect of money managers that elected to cut their entire stakes heading into Q3. Intriguingly, Benjamin A. Smith's Laurion Capital Management cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling close to $39.6 million in stock, and Robert Pohly's Samlyn Capital was right behind this move, as the fund dropped about $38.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Biogen Inc. (NASDAQ:BIIB) but similarly valued. We will take a look at Northrop Grumman Corporation (NYSE:NOC), Micron Technology, Inc. (NASDAQ:MU), Illumina, Inc. (NASDAQ:ILMN), and Prologis Inc (NYSE:PLD). This group of stocks' market valuations resemble BIIB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOC,35,815559,6 MU,61,3472436,0 ILMN,42,1065266,-2 PLD,25,454133,-5 Average,40.75,1451849,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $1452 million. That figure was $2937 million in BIIB's case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table. On the other hand Prologis Inc (NYSE:PLD) is the least popular one with only 25 bullish hedge fund positions. Biogen Inc. (NASDAQ:BIIB) 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately BIIB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned -5.3% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.