Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Jazz Pharmaceuticals plc (NASDAQ:JAZZ) in this article.
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) shareholders have witnessed an increase in activity from the world's largest hedge funds of late. JAZZ was in 25 hedge funds' portfolios at the end of the third quarter of 2019. There were 20 hedge funds in our database with JAZZ holdings at the end of the previous quarter. Our calculations also showed that JAZZ 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.
[caption id="attachment_339332" align="aligncenter" width="500"] Alex Denner of Sarissa Capital Management[/caption]
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. Let's go over the recent hedge fund action encompassing Jazz Pharmaceuticals plc (NASDAQ:JAZZ).
How have hedgies been trading Jazz Pharmaceuticals plc (NASDAQ:JAZZ)?
At Q3's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in JAZZ a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Jazz Pharmaceuticals plc (NASDAQ:JAZZ), with a stake worth $399.5 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $169.5 million. Arrowstreet Capital, Citadel Investment Group, and Sarissa Capital Management 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 Sarissa Capital Management allocated the biggest weight to Jazz Pharmaceuticals plc (NASDAQ:JAZZ), around 3.89% of its portfolio. Redmile Group is also relatively very bullish on the stock, setting aside 0.8 percent of its 13F equity portfolio to JAZZ.
Consequently, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Jazz Pharmaceuticals plc (NASDAQ:JAZZ). Point72 Asset Management had $27.8 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $7 million position during the quarter. The following funds were also among the new JAZZ investors: Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Matthew Tewksbury's Stevens Capital Management, and Anand Parekh's Alyeska Investment Group.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Jazz Pharmaceuticals plc (NASDAQ:JAZZ) but similarly valued. We will take a look at Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), SAGE Therapeutics Inc (NASDAQ:SAGE), Proofpoint Inc (NASDAQ:PFPT), and Gildan Activewear Inc (NYSE:GIL). This group of stocks' market caps resemble JAZZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MBT,14,403283,6 SAGE,29,430454,4 PFPT,42,636538,6 GIL,19,348320,-5 Average,26,454649,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $455 million. That figure was $837 million in JAZZ's case. Proofpoint Inc (NASDAQ:PFPT) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 14 bullish hedge fund positions. Jazz Pharmaceuticals plc (NASDAQ:JAZZ) 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 JAZZ as the stock returned 17.9% 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.
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