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Did Hedge Funds Drop The Ball On Seattle Genetics, Inc. (SGEN) ?

Reymerlyn Martin

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.

Is Seattle Genetics, Inc. (NASDAQ:SGEN) going to take off soon? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions decreased by 2 in recent months. Our calculations also showed that SGEN isn't among the 30 most popular stocks among hedge funds (view the video below). SGEN was in 17 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with SGEN positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are plenty of methods investors can use to assess stocks. Some of the best methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best money managers can trounce their index-focused peers by a healthy amount (see the details here).

Felix Baker - Baker Bros.

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the latest hedge fund action encompassing Seattle Genetics, Inc. (NASDAQ:SGEN).

How have hedgies been trading Seattle Genetics, Inc. (NASDAQ:SGEN)?

At Q2's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in SGEN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SGEN_oct2019

Among these funds, Baker Bros. Advisors held the most valuable stake in Seattle Genetics, Inc. (NASDAQ:SGEN), which was worth $3464.5 million at the end of the second quarter. On the second spot was Matrix Capital Management which amassed $217.4 million worth of shares. Moreover, Point72 Asset Management, Citadel Investment Group, and Rock Springs Capital Management were also bullish on Seattle Genetics, Inc. (NASDAQ:SGEN), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Seattle Genetics, Inc. (NASDAQ:SGEN) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there exists a select few fund managers who were dropping their full holdings in the second quarter. It's worth mentioning that Mike Vranos's Ellington dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at about $1.5 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dumped its stock, about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds in the second quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Seattle Genetics, Inc. (NASDAQ:SGEN) but similarly valued. These stocks are Equity Lifestyle Properties, Inc. (NYSE:ELS), Marathon Oil Corporation (NYSE:MRO), FMC Corporation (NYSE:FMC), and Mohawk Industries, Inc. (NYSE:MHK). This group of stocks' market values resemble SGEN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELS,18,553591,3 MRO,32,494413,-5 FMC,36,1206447,7 MHK,33,1990526,-1 Average,29.75,1061244,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1061 million. That figure was $3789 million in SGEN's case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Seattle Genetics, Inc. (NASDAQ:SGEN) is even less popular than ELS. Hedge funds clearly dropped the ball on SGEN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SGEN as the stock returned 23.4% during the third quarter and outperformed the market by an even larger margin.

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

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