Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Neurocrine Biosciences, Inc. (NASDAQ:NBIX) from the perspective of those elite funds.
Is Neurocrine Biosciences, Inc. (NASDAQ:NBIX) going to take off soon? Prominent investors are becoming less confident. The number of bullish hedge fund positions went down by 2 in recent months. Our calculations also showed that NBIX isn't among the 30 most popular stocks among hedge funds. NBIX was in 37 hedge funds' portfolios at the end of December. There were 39 hedge funds in our database with NBIX positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the latest hedge fund action regarding Neurocrine Biosciences, Inc. (NASDAQ:NBIX).
What does the smart money think about Neurocrine Biosciences, Inc. (NASDAQ:NBIX)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards NBIX over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Perceptive Advisors was the largest shareholder of Neurocrine Biosciences, Inc. (NASDAQ:NBIX), with a stake worth $315.4 million reported as of the end of September. Trailing Perceptive Advisors was Healthcor Management LP, which amassed a stake valued at $78 million. Rock Springs Capital Management, Marshall Wace LLP, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedgies that slashed their positions entirely last quarter. At the top of the heap, Ken Griffin's Citadel Investment Group said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, comprising about $54 million in stock. Brian Ashford-Russell and Tim Woolley's fund, Polar Capital, also sold off its stock, about $32.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Neurocrine Biosciences, Inc. (NASDAQ:NBIX). These stocks are Bright Horizons Family Solutions Inc (NYSE:BFAM), Ingredion Inc (NYSE:INGR), Bausch Health Companies (NYSE:BHC), and AMERCO (NASDAQ:UHAL). This group of stocks' market caps are closest to NBIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BFAM,16,279164,0 INGR,21,235894,0 BHC,32,1348483,2 UHAL,7,348384,-1 Average,19,552981,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $782 million in NBIX's case. Bausch Health Companies (NYSE:BHC) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on NBIX as the stock returned 27.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.