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Were Hedge Funds Right About Biogen Inc. (BIIB)?

Reymerlyn Martin
·6 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Biogen Inc. (NASDAQ:BIIB) in this article.

Biogen Inc. (NASDAQ:BIIB) was in 63 hedge funds' portfolios at the end of June. The all time high for this statistics is 81. BIIB has seen a decrease in support from the world's most elite money managers of late. There were 70 hedge funds in our database with BIIB holdings at the end of March. Our calculations also showed that BIIB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let's analyze the fresh hedge fund action regarding Biogen Inc. (NASDAQ:BIIB).

Hedge fund activity in Biogen Inc. (NASDAQ:BIIB)

At Q2's end, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in BIIB over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Biogen Inc. (NASDAQ:BIIB), with a stake worth $1045 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $583.1 million. D E Shaw, OrbiMed Advisors, and Arrowstreet Capital 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 Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 19.14% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, setting aside 9.69 percent of its 13F equity portfolio to BIIB.

Due to the fact that Biogen Inc. (NASDAQ:BIIB) has experienced falling interest from the aggregate hedge fund industry, it's easy to see that there were a few hedgies that slashed their entire stakes heading into Q3. Intriguingly, Brandon Haley's Holocene Advisors dumped the largest position of the 750 funds tracked by Insider Monkey, comprising close to $72 million in stock, and Stephen DuBois's Camber Capital Management was right behind this move, as the fund sold off about $63.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Biogen Inc. (NASDAQ:BIIB) but similarly valued. These stocks are The Charles Schwab Corporation (NYSE:SCHW), General Dynamics Corporation (NYSE:GD), Vodafone Group Plc (NASDAQ:VOD), National Grid plc (NYSE:NGG), Ferrari N.V. (NYSE:RACE), Koninklijke Philips NV (NYSE:PHG), and Ambev SA (NYSE:ABEV). This group of stocks' market values are similar to BIIB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCHW,71,3295929,9 GD,42,5491682,3 VOD,16,726090,2 NGG,2,430749,-4 RACE,25,1361698,-4 PHG,6,83694,-5 ABEV,13,517659,4 Average,25,1701072,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1701 million. That figure was $3268 million in BIIB's case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 2 bullish hedge fund positions. Biogen Inc. (NASDAQ:BIIB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIIB is 65.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately BIIB wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned 4.7% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.

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