At Insider Monkey, we pore over the filings of nearly 750 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 Takeda Pharmaceutical Company Limited (NYSE:TAK) makes for a good investment right now.
Takeda Pharmaceutical Company Limited (NYSE:TAK) was in 28 hedge funds' portfolios at the end of September. TAK has seen an increase in enthusiasm from smart money lately. There were 27 hedge funds in our database with TAK holdings at the end of the previous quarter. Our calculations also showed that TAK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_25210" align="aligncenter" width="424"] John Paulson of Paulson & Co[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the key hedge fund action regarding Takeda Pharmaceutical Company Limited (NYSE:TAK).
What have hedge funds been doing with Takeda Pharmaceutical Company Limited (NYSE:TAK)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in TAK over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Glenview Capital was the largest shareholder of Takeda Pharmaceutical Company Limited (NYSE:TAK), with a stake worth $472 million reported as of the end of September. Trailing Glenview Capital was Paulson & Co, which amassed a stake valued at $227.8 million. Baupost Group, GMT Capital, and HBK Investments 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 Glenview Capital allocated the biggest weight to Takeda Pharmaceutical Company Limited (NYSE:TAK), around 4.97% of its portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 4.56 percent of its 13F equity portfolio to TAK.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, created the most outsized position in Takeda Pharmaceutical Company Limited (NYSE:TAK). Tudor Investment Corp had $7.5 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $4.6 million position during the quarter. The only other fund with a brand new TAK position is Matthew Tewksbury's Stevens Capital Management.
Let's now review hedge fund activity in other stocks similar to Takeda Pharmaceutical Company Limited (NYSE:TAK). We will take a look at Prologis Inc (NYSE:PLD), Vodafone Group Plc (NASDAQ:VOD), DuPont de Nemours, Inc. (NYSE:DD), and Deere & Company (NYSE:DE). This group of stocks' market caps are closest to TAK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLD,27,360500,3 VOD,19,685397,8 DD,47,1502453,5 DE,40,1818266,0 Average,33.25,1091654,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1092 million. That figure was $1244 million in TAK's case. DuPont de Nemours, Inc. (NYSE:DD) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 19 bullish hedge fund positions. Takeda Pharmaceutical Company Limited (NYSE:TAK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on TAK as the stock returned 18% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.