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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Neurocrine Biosciences, Inc. (NASDAQ:NBIX) makes for a good investment right now.
Is NBIX a good stock to buy now? Neurocrine Biosciences, Inc. (NASDAQ:NBIX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 38 hedge funds' portfolios at the end of September. Our calculations also showed that NBIX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Watsco Inc (NYSE:WSO), ON Semiconductor Corporation (NASDAQ:ON), and L Brands Inc (NYSE:LB) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Robert Pohly of Samlyn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. 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 website. Keeping this in mind let's view the recent hedge fund action encompassing Neurocrine Biosciences, Inc. (NASDAQ:NBIX).
Do Hedge Funds Think NBIX Is A Good Stock To Buy Now?
At Q3's end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in NBIX over the last 21 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Neurocrine Biosciences, Inc. (NASDAQ:NBIX), which was worth $206.7 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $148.9 million worth of shares. Rock Springs Capital Management, OrbiMed Advisors, and Healthcor Management LP 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 Birchview Capital allocated the biggest weight to Neurocrine Biosciences, Inc. (NASDAQ:NBIX), around 5.01% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 3.58 percent of its 13F equity portfolio to NBIX.
Since Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds that elected to cut their full holdings in the third quarter. Interestingly, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $24.9 million in stock. Xiuping Li's fund, Opti Capital Management, also dropped its stock, about $15 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Neurocrine Biosciences, Inc. (NASDAQ:NBIX). We will take a look at Watsco Inc (NYSE:WSO), ON Semiconductor Corporation (NASDAQ:ON), L Brands Inc (NYSE:LB), The Western Union Company (NYSE:WU), Imperial Oil Limited (NYSE:IMO), Anaplan, Inc. (NYSE:PLAN), and ASE Technology Holding Co., Ltd. (NYSE:ASX). This group of stocks' market valuations match NBIX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSO,29,269460,8 ON,29,360766,-3 LB,45,3367576,3 WU,36,669370,2 IMO,11,28115,0 PLAN,55,3198745,6 ASX,11,131886,0 Average,30.9,1146560,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $1147 million. That figure was $1005 million in NBIX's case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 11 bullish hedge fund positions. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NBIX is 61. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately NBIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NBIX were disappointed as the stock returned 5.5% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.