Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) a buy here? The smart money is getting less optimistic. The number of bullish hedge fund positions were trimmed by 4 lately. Our calculations also showed that JAZZ 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 review the latest hedge fund action surrounding Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ).
How have hedgies been trading Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ)?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JAZZ over the last 15 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), which was worth $284.9 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $101.8 million worth of shares. Moreover, Viking Global, Two Sigma Advisors, and Arrowstreet Capital were also bullish on Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), allocating a large percentage of their portfolios to this stock.
Due to the fact that Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) has experienced bearish sentiment from the smart money, logic holds that there were a few hedge funds who sold off their positions entirely in the third quarter. Intriguingly, Doug Silverman and Alexander Klabin's Senator Investment Group said goodbye to the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $50.6 million in stock, and Ken Heebner's Capital Growth Management was right behind this move, as the fund cut about $40.9 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) but similarly valued. We will take a look at Booz Allen Hamilton Holding Corporation (NYSE:BAH), West Pharmaceutical Services Inc. (NYSE:WST), Vereit Inc (NYSE:VER), and Herbalife Nutrition Ltd. (NYSE:HLF). This group of stocks' market caps are closest to JAZZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAH,19,230572,-7 WST,21,290123,1 VER,21,403492,3 HLF,32,3529120,3 Average,23.25,1113327,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $1113 million. That figure was $773 million in JAZZ's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the least popular one with only 19 bullish hedge fund positions. Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 JAZZ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on JAZZ were disappointed as the stock returned -10.5% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.