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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Illumina, Inc. (NASDAQ:ILMN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Illumina, Inc. (NASDAQ:ILMN) was in 52 hedge funds' portfolios at the end of March. The all time high for this statistic is 62. ILMN investors should be aware of an increase in hedge fund sentiment recently. There were 45 hedge funds in our database with ILMN holdings at the end of December. Our calculations also showed that ILMN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's review the new hedge fund action surrounding Illumina, Inc. (NASDAQ:ILMN).
Do Hedge Funds Think ILMN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the fourth quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in ILMN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of Illumina, Inc. (NASDAQ:ILMN), with a stake worth $517.3 million reported as of the end of March. Trailing Generation Investment Management was GuardCap Asset Management, which amassed a stake valued at $406 million. Select Equity Group, Citadel Investment Group, and Citadel Investment Group 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 GuardCap Asset Management allocated the biggest weight to Illumina, Inc. (NASDAQ:ILMN), around 7.34% of its 13F portfolio. RiverPark Advisors is also relatively very bullish on the stock, earmarking 2.5 percent of its 13F equity portfolio to ILMN.
Now, some big names have been driving this bullishness. Renaissance Technologies, established the most outsized position in Illumina, Inc. (NASDAQ:ILMN). Renaissance Technologies had $52.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $11.9 million investment in the stock during the quarter. The following funds were also among the new ILMN investors: Greg Eisner's Engineers Gate Manager, Donald Sussman's Paloma Partners, and Jinghua Yan's TwinBeech Capital.
Let's check out hedge fund activity in other stocks similar to Illumina, Inc. (NASDAQ:ILMN). We will take a look at The Progressive Corporation (NYSE:PGR), Moody's Corporation (NYSE:MCO), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), NXP Semiconductors NV (NASDAQ:NXPI), Prudential Public Limited Company (NYSE:PUK), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), and Stellantis N.V. (NYSE:STLA). This group of stocks' market valuations are similar to ILMN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PGR,45,1211037,-3 MCO,55,13726876,-4 VRTX,68,3711731,15 NXPI,53,1718673,-13 PUK,2,4640,0 PBR,27,878461,3 STLA,21,751799,6 Average,38.7,3143317,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $3143 million. That figure was $1596 million in ILMN's case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Illumina, Inc. (NASDAQ:ILMN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ILMN is 73. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on ILMN as the stock returned 18% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.