U.S. Markets closed

Did Hedge Funds Drop The Ball On Regeneron Pharmaceuticals Inc (REGN) ?

Abigail Fisher

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 third 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 years and analyze what the smart money thinks of Regeneron Pharmaceuticals Inc (NASDAQ:REGN) based on that data.

Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has experienced a decrease in hedge fund interest of late. Our calculations also showed that REGN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.

[caption id="attachment_315022" align="aligncenter" width="400"] Michael Castor of Sio Capital[/caption]

Michael Castor Sio Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the new hedge fund action surrounding Regeneron Pharmaceuticals Inc (NASDAQ:REGN).

How are hedge funds trading Regeneron Pharmaceuticals Inc (NASDAQ:REGN)?

At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in REGN a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

REGN_dec2019

Of the funds tracked by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the number one position in Regeneron Pharmaceuticals Inc (NASDAQ:REGN). Point72 Asset Management has a $122.3 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $110.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Israel Englander's Millennium Management, Cliff Asness's AQR Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to Regeneron Pharmaceuticals Inc (NASDAQ:REGN), around 3.89% of its portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, designating 2.8 percent of its 13F equity portfolio to REGN.

Seeing as Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has experienced falling interest from hedge fund managers, it's easy to see that there lies a certain "tier" of hedgies who sold off their positions entirely heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the largest investment of the "upper crust" of funds monitored by Insider Monkey, comprising close to $126.3 million in stock. Ori Hershkovitz's fund, Nexthera Capital, also sold off its stock, about $1.8 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds heading into Q4.

Let's also examine hedge fund activity in other stocks similar to Regeneron Pharmaceuticals Inc (NASDAQ:REGN). We will take a look at ONEOK, Inc. (NYSE:OKE), NXP Semiconductors NV (NASDAQ:NXPI), Atlassian Corporation Plc (NASDAQ:TEAM), and AvalonBay Communities Inc (NYSE:AVB). This group of stocks' market caps are similar to REGN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OKE,23,308569,2 NXPI,59,3380862,-1 TEAM,46,2413494,10 AVB,19,537344,-2 Average,36.75,1660067,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1660 million. That figure was $870 million in REGN's case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 19 bullish hedge fund positions. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on REGN as the stock returned 33% during the first two months of Q4 and outperformed the market by an even larger margin.

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

Related Content