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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Amgen, Inc. (NASDAQ:AMGN) to find out whether there were any major changes in hedge funds' views.
Amgen, Inc. (NASDAQ:AMGN) was in 47 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 73. AMGN investors should pay attention to a decrease in activity from the world's largest hedge funds lately. There were 49 hedge funds in our database with AMGN holdings at the end of December. Our calculations also showed that AMGN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now we're going to analyze the recent hedge fund action regarding Amgen, Inc. (NASDAQ:AMGN).
Do Hedge Funds Think AMGN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMGN over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Amgen, Inc. (NASDAQ:AMGN), which was worth $280.7 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $208.5 million worth of shares. Pzena Investment Management, Adage Capital Management, 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 Parkman Healthcare Partners allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 2.6% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, earmarking 2.26 percent of its 13F equity portfolio to AMGN.
Because Amgen, Inc. (NASDAQ:AMGN) has witnessed a decline in interest from the smart money, it's safe to say that there is a sect of fund managers who were dropping their full holdings by the end of the first quarter. Interestingly, Larry Robbins's Glenview Capital dumped the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $32.5 million in stock. Michael Castor's fund, Sio Capital, also dropped its stock, about $9.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks similar to Amgen, Inc. (NASDAQ:AMGN). We will take a look at HDFC Bank Limited (NYSE:HDB), Bristol Myers Squibb Company (NYSE:BMY), Philip Morris International Inc. (NYSE:PM), Shopify Inc (NYSE:SHOP), Lowe's Companies, Inc. (NYSE:LOW), Charter Communications, Inc. (NASDAQ:CHTR), and JD.Com Inc (NASDAQ:JD). This group of stocks' market caps resemble AMGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HDB,27,1964796,-4 BMY,81,5037397,-50 PM,48,5494085,-4 SHOP,91,9984457,1 LOW,61,5171876,-10 CHTR,74,16399220,-16 JD,75,11309916,-14 Average,65.3,7908821,-13.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 65.3 hedge funds with bullish positions and the average amount invested in these stocks was $7909 million. That figure was $1002 million in AMGN's case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 27 bullish hedge fund positions. Amgen, Inc. (NASDAQ:AMGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AMGN is 37.9. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately AMGN wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AMGN investors were disappointed as the stock returned -3.4% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.