We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ).
Is Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) a buy right now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions went down by 2 lately. Our calculations also showed that JAZZ isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_339332" align="aligncenter" width="400"] Alex Denner of Sarissa Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a peek at the fresh hedge fund action encompassing Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ).
How are hedge funds trading Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ)?
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JAZZ over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the biggest position in Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), worth close to $529.9 million, comprising 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $292.6 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Alex Denner's Sarissa Capital Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), around 5.5% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to JAZZ.
Seeing as Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) has experienced bearish sentiment from the smart money, logic holds that there were a few hedgies who were dropping their entire stakes in the third quarter. Interestingly, Steve Cohen's Point72 Asset Management dumped the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $27.8 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dropped its stock, about $24.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ). These stocks are Wayfair Inc (NYSE:W), Service Corporation International (NYSE:SCI), Bio-Techne Corporation (NASDAQ:TECH), and Alaska Air Group, Inc. (NYSE:ALK). All of these 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 W,33,1500314,-1 SCI,18,320390,-2 TECH,26,266703,5 ALK,39,627119,4 Average,29,678632,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $679 million. That figure was $1193 million in JAZZ's case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) is the least popular one with only 18 bullish hedge fund positions. Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately JAZZ wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JAZZ investors were disappointed as the stock returned -33.5% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.