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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Seattle Genetics, Inc. (NASDAQ:SGEN) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Seattle Genetics, Inc. (NASDAQ:SGEN) was in 38 hedge funds' portfolios at the end of June. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SGEN has seen an increase in hedge fund sentiment of late. There were 27 hedge funds in our database with SGEN holdings at the end of March. Our calculations also showed that SGEN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are seen as underperforming, old investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our experts hone in on the moguls of this club, about 850 funds. Most estimates calculate that this group of people handle the lion's share of all hedge funds' total asset base, and by observing their best picks, Insider Monkey has formulated numerous investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Paul Marshall of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we're going to go over the new hedge fund action surrounding Seattle Genetics, Inc. (NASDAQ:SGEN).
How have hedgies been trading Seattle Genetics, Inc. (NASDAQ:SGEN)?
At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SGEN over the last 20 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of Seattle Genetics, Inc. (NASDAQ:SGEN), with a stake worth $8032 million reported as of the end of September. Trailing Baker Bros. Advisors was Woodline Partners, which amassed a stake valued at $59.9 million. Renaissance Technologies, Rock Springs Capital Management, and Zevenbergen Capital Investments 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 Seattle Genetics, Inc. (NASDAQ:SGEN), around 35.43% of its 13F portfolio. Woodline Partners is also relatively very bullish on the stock, setting aside 2.37 percent of its 13F equity portfolio to SGEN.
As one would reasonably expect, specific money managers were leading the bulls' herd. Zevenbergen Capital Investments, managed by Nancy Zevenbergen, established the most valuable position in Seattle Genetics, Inc. (NASDAQ:SGEN). Zevenbergen Capital Investments had $42.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $11.7 million investment in the stock during the quarter. The other funds with brand new SGEN positions are Peter Muller's PDT Partners, Bhagwan Jay Rao's Integral Health Asset Management, and Principal Global Investors's Columbus Circle Investors.
Let's also examine hedge fund activity in other stocks similar to Seattle Genetics, Inc. (NASDAQ:SGEN). We will take a look at Synopsys, Inc. (NASDAQ:SNPS), Brown-Forman Corporation (NYSE:BF), Chipotle Mexican Grill, Inc. (NYSE:CMG), Travelers Companies Inc (NYSE:TRV), ZTO Express (Cayman) Inc. (NYSE:ZTO), Eversource Energy (NYSE:ES), and Capital One Financial Corp. (NYSE:COF). All of these stocks' market caps match SGEN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNPS,34,931266,3 BF,28,521945,0 CMG,41,3780591,-7 TRV,28,398629,-1 ZTO,18,715518,3 ES,28,501377,2 COF,55,1908354,5 Average,33.1,1251097,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $1251 million. That figure was $8430 million in SGEN's case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 18 bullish hedge fund positions. Seattle Genetics, Inc. (NASDAQ:SGEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SGEN is 67. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately SGEN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SGEN were disappointed as the stock returned -6.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.