As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Elanco Animal Health Incorporated (NYSE:ELAN).
Is Elanco Animal Health Incorporated (NYSE:ELAN) going to take off soon? Prominent investors are in a bullish mood. The number of bullish hedge fund bets went up by 15 lately. Our calculations also showed that elan isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the key hedge fund action surrounding Elanco Animal Health Incorporated (NYSE:ELAN).
How have hedgies been trading Elanco Animal Health Incorporated (NYSE:ELAN)?
Heading into the second quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 83% from the fourth quarter of 2018. By comparison, 0 hedge funds held shares or bullish call options in ELAN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Elanco Animal Health Incorporated (NYSE:ELAN), which was worth $251.2 million at the end of the first quarter. On the second spot was Laurion Capital Management which amassed $209.9 million worth of shares. Moreover, Empyrean Capital Partners, BlueCrest Capital Mgmt., and OZ Management were also bullish on Elanco Animal Health Incorporated (NYSE:ELAN), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Elanco Animal Health Incorporated (NYSE:ELAN). Citadel Investment Group had $251.2 million invested in the company at the end of the quarter. Michael A. Price and Amos Meron's Empyrean Capital Partners also made a $79.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Daniel S. Och's OZ Management, David Costen Haley's HBK Investments, and Philip Hilal's Clearfield Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Elanco Animal Health Incorporated (NYSE:ELAN) but similarly valued. These stocks are Old Dominion Freight Line, Inc. (NASDAQ:ODFL), Kansas City Southern (NYSE:KSU), SVB Financial Group (NASDAQ:SIVB), and Akamai Technologies, Inc. (NASDAQ:AKAM). This group of stocks' market valuations resemble ELAN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ODFL,26,220250,6 KSU,26,560883,6 SIVB,29,551951,-4 AKAM,28,763869,-6 Average,27.25,524238,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $1056 million in ELAN's case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Elanco Animal Health Incorporated (NYSE:ELAN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ELAN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ELAN were disappointed as the stock returned -1.7% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.