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Hedge Fund Consensus Stocks vs. Sanofi (SNY) In 2019

Asma UL Husna

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds' favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Sanofi (NASDAQ:SNY) and compare its performance against hedge funds' favorite stocks.

Is Sanofi (NASDAQ:SNY) undervalued? Hedge funds are becoming hopeful. The number of long hedge fund positions moved up by 2 in recent months. Our calculations also showed that SNY 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). SNY was in 27 hedge funds' portfolios at the end of September. There were 25 hedge funds in our database with SNY holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_688214" align="aligncenter" width="473"] Kamran Moghtaderi of Eversept Partners[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to take a look at the recent hedge fund action encompassing Sanofi (NASDAQ:SNY).

How have hedgies been trading Sanofi (NASDAQ:SNY)?

Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SNY over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Fisher's Fisher Asset Management has the number one position in Sanofi (NASDAQ:SNY), worth close to $805.1 million, amounting to 0.9% of its total 13F portfolio. The second largest stake is held by Point72 Asset Management, managed by Steve Cohen, which holds a $46.3 million position; 0.3% of its 13F portfolio is allocated to the company. Some other peers that are bullish consist of Dmitry Balyasny's Balyasny Asset Management, Paul Singer's Elliott Management and Kamran Moghtaderi's Eversept Partners. In terms of the portfolio weights assigned to each position Circle Road Advisors allocated the biggest weight to Sanofi (NASDAQ:SNY), around 8.09% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 3.47 percent of its 13F equity portfolio to SNY.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Sanofi (NASDAQ:SNY). Citadel Investment Group had $8.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also made a $7 million investment in the stock during the quarter. The other funds with brand new SNY positions are Brandon Haley's Holocene Advisors, Dmitry Balyasny's Balyasny Asset Management, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Sanofi (NASDAQ:SNY) but similarly valued. These stocks are Union Pacific Corporation (NYSE:UNP), NextEra Energy, Inc. (NYSE:NEE), AbbVie Inc (NYSE:ABBV), and Lockheed Martin Corporation (NYSE:LMT). This group of stocks' market values match SNY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNP,62,5197745,-2 NEE,41,1505214,1 ABBV,61,4434502,6 LMT,46,1782982,-2 Average,52.5,3230111,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.5 hedge funds with bullish positions and the average amount invested in these stocks was $3230 million. That figure was $985 million in SNY's case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand NextEra Energy, Inc. (NYSE:NEE) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks Sanofi (NASDAQ:SNY) is even less popular than NEE. Hedge funds dodged a bullet by taking a bearish stance towards SNY. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SNY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SNY investors were disappointed as the stock returned 20.5% in 2019 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 65 percent of these stocks outperformed the market in 2019. 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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