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How Did Incyte Corporation (INCY) Compare Against Top Hedge Fund Stocks in 2019?

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Incyte Corporation (NASDAQ:INCY).

Is Incyte Corporation (NASDAQ:INCY) the right pick for your portfolio? Prominent investors are getting less bullish. The number of long hedge fund bets fell by 4 lately. Our calculations also showed that INCY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). INCY was in 32 hedge funds' portfolios at the end of the third quarter of 2019. There were 36 hedge funds in our database with INCY positions at the end of the previous quarter.

At the moment there are numerous formulas stock traders put to use to assess stocks. A duo of the less known formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat the S&P 500 by a healthy amount (see the details here).

[caption id="attachment_338175" align="alignnone" width="2480"] Felix Baker of Baker Bros.[/caption]

Felix Baker - Baker Bros.

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's review the key hedge fund action regarding Incyte Corporation (NASDAQ:INCY).

How are hedge funds trading Incyte Corporation (NASDAQ:INCY)?

Heading into the fourth quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards INCY over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is INCY A Good Stock To Buy?

More specifically, Baker Bros. Advisors was the largest shareholder of Incyte Corporation (NASDAQ:INCY), with a stake worth $2373.6 million reported as of the end of September. Trailing Baker Bros. Advisors was Renaissance Technologies, which amassed a stake valued at $203.7 million. Matrix Capital Management, AQR Capital Management, and Two Sigma Advisors 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 Baker Bros. Advisors allocated the biggest weight to Incyte Corporation (NASDAQ:INCY), around 16.15% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, dishing out 3.54 percent of its 13F equity portfolio to INCY.

Seeing as Incyte Corporation (NASDAQ:INCY) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that elected to cut their full holdings heading into Q4. At the top of the heap, Stanley Druckenmiller's Duquesne Capital said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $17.2 million in call options, and Israel Englander's Millennium Management was right behind this move, as the fund dumped about $17 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds heading into Q4.

Let's now review hedge fund activity in other stocks similar to Incyte Corporation (NASDAQ:INCY). These stocks are Principal Financial Group Inc (NYSE:PFG), Invitation Homes Inc. (NYSE:INVH), Citizens Financial Group Inc (NYSE:CFG), and Wausau Paper Corp. (NYSE:WPP). This group of stocks' market values resemble INCY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFG,19,98613,2 INVH,28,1096604,-3 CFG,38,1571462,-1 WPP,3,41384,0 Average,22,702016,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $3215 million in INCY's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Wausau Paper Corp. (NYSE:WPP) is the least popular one with only 3 bullish hedge fund positions. Incyte Corporation (NASDAQ:INCY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on INCY as the stock returned 41.8% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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